I truely hate accounting...vol. HOW THE HELL??

[chris steez]

Can someone explain to me this whole depreciation and adjusting accounts #@!*? truly confusing

 

[theconditioner]

^ Can you elaborate?

 

[chris steez]

im so confused idk how to ask for help, basically the chapter is about the accrual accounting concepts...such %+! revenue recognition and all that stuff...

But i dont know how to record prepaid expenses or unearned revenues

 

[chueco dtb]

Don't feel bad, im still in HS and im taking accounting right now. I hate the debit and credit thing, not sure if im going to pass the class though? LucklyI have this puerto rican girl right next to me so I'll get the answers from her.

 

[theconditioner]

Prepaid expenses:

Example: Lets say you rent an office for your business. You are supposed to pay (unrealistically) at the END of the month. But you want to play it safe andprepay your rent. So you pay $700 now, decreasing your cash balance. But you haven't used the office for the month, since it is only the first day of themonth. So essentially, the $700 is NOT an expense YET.

It's kind of like a reverse IOU...kind of like: You Owe Me (in this case, they owe you the right to use the office for the month). Here is the journalentry at the BEGINNING of the month.

Prepaid Expense................$700...................................................+Asset
............................Cash............................$700............................-Asset

When the month is up, they made up their end of the deal, so now you must expense it then. Thus, you must reverse out your "asset" - your PrepaidExpense Asset. Here is the journal entry:

Rent Expense............................$700...................................-Equity
............................Prepaid Expense $700............................-Asset

 

[theconditioner]

Unearned Revenues:

Now, instead of being the person renting the office in the previous example, imagine that you're the guy that owns the building and is renting it out.

They give you cash today, but it's only the beginning of the month.

You really haven't earned that money yet, because they haven't used the office for the month.

Thus, it is sort of like you're holding money you haven't earned yet...so it's a liability.

But at the same time, you gained an asset: cash.

Here is the first journal entry at the beginning of the month:

Cash............$700.............................................................................................+Asset
............................Unearned Revenue............................$700............................+Liability (which is "bad")


At the end of the month, you earned that money, so it is no longer a liability. Thus, reverse out your liability and recognize revenue!:

Unearned Revenue............................$700.................................................-Liability
............................Rent Revenue............................$700............................+Equity

 

[psykho]

%!@# ACCOUTING. that is all

 

[theconditioner]

Forget Yuku.

Here is what i'm saying:

edit..I'll PM you.



Oh yeah, if you need any help, feel free to PM me. Peace!