Pre-Paid and Accrued Items

Pre-paid items

 

Balance sheet presentation

Time 1

Time 2

 

 

 

 

Cash outflow

Expense

 

 

Accrued assets: Pre-paid expenses

 

Cash inflow

Revenue

 

 

Accrued liabilities: Deferred revenue

 

 

 

Accrued items

 

Balance sheet presentation

Time 1

Time 2

 

 

 

 

Revenue (other)

Cash inflow

 

 

Accrued assets: Accrued revenue

 

Expense (other)

Cash outflow

 

 

Accrued liabilities: Accrued expenses

Revenue should be recognized with the debit to accounts receivable or contract assets.

In contrast, "other" revenue (revenue associated with peripheral or incidental transactions) should be recognized with the debit to accrued revenue.

Also see the accounting elements page for a more detailed discussion on how to distinguish revenue, other revenue and gains.

Expenses should be recognized with the credit to accounts payable.

In contrast, "other" expenses (expenses associated with peripheral or incidental transactions) should be recognized with the credit to accrued expenses.

Also see the accounting elements page for a more detailed discussion on how to distinguish expenses, other expenses and losses.


Revenue should be recognized with a debit to accounts receivable or contract assets.

In contrast, "other" revenue (revenue associated with peripheral or incidental transactions) should be recognized with a debit accrued revenue.

Also see the accounting elements page for a more detailed discussion on how to distinguish revenue, other revenue and gains.

Expenses should be recognized with a debit to accounts payable.

In contrast, "other" expenses (expenses associated with peripheral or incidental transactions) should be recognized with a debit accrued expenses.

Also see the accounting elements page for a more detailed discussion on how to distinguish expensses, other expenees and losses.

Pre-paid expense, deferred revenue

1/1/X1 XYZ rented a truck from ABC for 6 months paying 120,000 in advance.

As the period was for one year, XYZ applied the recognition exemption outlined in IFRS  16.5.a | US GAAP ASC 842-20-25-2 and did not capitalize a ROU asset and associated liability.

Dr/Cr

XYZ: 1/1/X1 | 1.1.X1

 

 

Accrued assets: Pre-paid rent

120,000

 

 

Cash

 

120,000

ABC: 1/1/X1 | 1.1.X1

 

 

Cash

120,000

 

 

Liabilities: Deferred (unearned) revenue: Rent

 

120,000


XYZ: 3/31/X1 | 31.3.X1

 

 

Expense: Distribution: Vehicle rent

60,000

 

 

 

 

60,000

ABC: 3/31/X1 | 31.3.X1

 

 

Liabilities: Deferred (unearned) revenue: Rent

60,000

 

 

Rental revenue

 

60,000


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