19.2 - Balance-day adjustments for revenue

1. 19.2
BALANCE-DAY ADJUSTMENTS
FOR REVENUE

2. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 Balance-day adjustments are required for…
19.2 BALANCE-DAY ADJUSTMENTS
FOR REVENUE
Depreciation
Prepaid Expenses
Accrued Expenses
Prepaid Revenue
Accrued Revenue
Unit 3

3. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 From Unit 3 – your mobile phone can be paid one of two ways…
19.2 BALANCE-DAY ADJUSTMENTS
FOR REVENUE
Balance Sheet at 31 July
Current Assets $
Prepaid phone expense 50
At 31 July you have an Asset because:
• You have a resource which you control
• Arising from a past event
• There will be an inflow of future
economic benefits
This is a
Prepaid Expense
To be used
in August
Prepaid
phone
$50 prepaid
in July for
August’s calls
AugustJuly

4. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 From Unit 3 – your mobile phone can be paid one of two ways…
19.2 BALANCE-DAY ADJUSTMENTS
FOR REVENUE
At 31 August you have a Liability because:
• You have a present obligation
• Arising from a past event
• There will be an outflow of future
economic benefits
This is an
Accrued Expense
Calls made
in August
August September
$50
Balance Sheet at 31 August
Current Liabilities $
Accrued phone expense 50

5. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
19.2 BALANCE-DAY ADJUSTMENTS
FOR REVENUE
Cash Paid
Expense
Incurred
Cash Paid
Prepaid
Expense
Accrued
Expense
This period

6. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 As with Expenses, there are two types of balance-day adjustments
when it comes to Revenue:
 Prepaid Revenue: revenue that has been received in advance but not
yet earned
 Accrued Revenue: revenue that has been earned but not yet received
19.2 BALANCE-DAY ADJUSTMENTS
FOR REVENUE
Cash
Received
Revenue
Earned
Cash
Received
Prepaid
Revenue
Accrued
Revenue
This period

7. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 Prepaid Revenue: revenue that has been received in advance but not
yet earned, e.g. airlines
19.2 BALANCE-DAY ADJUSTMENTS
FOR REVENUE
At 31 October there is a Liability because:
• You have a present obligation
• Arising from a past event
• There will be an outflow of future
economic benefits
This is a
Prepaid Revenue
October November
Airline earns Revenue by
flying customer to
destination
Balance Sheet at 31 October
Current Liabilities $
Prepaid revenue 900
Customer pays airline $900
for flights next month

8. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 Accrued Revenue: revenue that has been earned but not yet received,
e.g. investments
19.2 BALANCE-DAY ADJUSTMENTS
FOR REVENUE
Balance Sheet at 31 July
Current Assets $
Accrued interest revenue 50
At 31 July you have an Asset because:
• You have a resource which you control
• Arising from a past event
• There will be an inflow of future
economic benefits
This is an
Accrued Revenue
Received in
August
$50 interest
earned in
July
AugustJuly