Sarah, one of the women in the class, brought breakfast today. A bunch of Starbucks pastries; apparently she works there. Very kind of her.Asset and expense accounts can have their values partially or fully prepaid or deferred. Prepaying means accounting for their value before the matching work or use has actually been done. Deferring an asset or expense means pushing its transactions off to the next accounting period. Many fixed assets are considered prepaid expenses; buildings and property, supplies, etc. Any asset which depreciates or is consumed can probably be considered a prepaid expense.
At the end of an accounting period, one can have accrued expenses. Typically, liability expenses and wage expenses accrue. Expenses typically accrue when the expense is incurred steadily over a period of time but settled at regular intervals. If the settling interval fails to match up to the accounting period, there will be unsettled expenses at the end of period. These expenses are the accrued expenses.
Enearned revenue is money received for work which has not yet been performed. Unearned revenue is a liability until the association work has been performed, at which time the unearned revenue account is debited and the appropriate revenue account is credited.
Revenue can also accrue. Accrued revenue refers to a transaction where a good or service has been delivered, but no payment has yet been received. This is also known as unrecorded revenues. An example of this is interest on a loan which will not be paid during the accounting period. While no money changes hands, the interest is earned during the current period, an the interest receivable account should be debited, and the interest revenue account credited. This sort of adjustment typically happens at end of period.
Depreciation is the loss of value a fixed asset suffers over time. Straightline depreciation is the cost of the asset, minus the estimated residual value it has at the end of its life, divided by its estimated useful life. (cost-res. value)/life When recording depreciation in a journal, you debit an account named “depreciation expense”, and credit an account named “accumulated depreciation, “. The accumulated depreciation account is known as a contra-asset. Depreciation is not directly applied to the asset account. The book value of an asset is its asset account minus its contra-asset account.