Plz help me understand:Prepaid Expenses,Unearned Revenues,Accrued Revenues and Accrued Expenses

[Arkentos]

i am confused among Prepaid Expenses,Unearned Revenues,Accrued Revenues and Accrued Expenses.
Even though i read the definitions on the Book several times(Accounting 22e,Warren/Reeve/Duchac),i can not understand them deeply.
Can anyone help me understand those terms above.
Thanks in advanced.

 

[mauty]

Ðề: Plz help me understandrepaid Expenses,Unearned Revenues,Accrued Revenues and Accrued Expenses

Are you an alien? Or you're studying American accounting? I wonder I should answer you by English or by American accounting. My English is not good to explain these words, although I can understand you. Do you want to understand definitions of these?
Prepaid Expenses: is spent in this term but it is used in many term. Ex: You want to rent a warehouse, you have to pay 6.000US for 6 months, but in Accounting, you only register for 1 month. So, you have to use this acount “Prepaid expenses” (by Credit: “Prepaid expenses” , and debit “Cash”: 6.000US). At the same time, you write for this month by Credit: “Cost for management” , and debit “Prepaid expenses”: 1.000US. And you do this step in 6 months, until the acount “Prepaid expenses” is emty.
My email: ntngoctrinh81@yahoo.com.vn

 

[xubim]

Ðề: Plz help me understandrepaid Expenses,Unearned Revenues,Accrued Revenues and Accrued Expenses

Before understanding these definitions, you should have a look at matching principle in accounting; it says that the revenue which was created in a period must be matched with the expenses in that period. For example, if you spend $10000 to buy 10 items and sell 5 items with the price at $3000 for each, the revenue will be $15000 and the cost of goods sold is only $5000.
So, in a more complex situation like in production company, accountants have to calculate the cost of goods sold (COGS) or expenses which are matched with the revenue in the same period.
* Prepaid Expenses: the example below is right. They are expenses that you have to paid first but you can use for many periods (short-term or long-term). So, they have to be devided by the number of period they can be used.
* Accrued Expenses is vice versa. For example, you find a nice supplier who let you use their service for 6 months and give you the invoices twice a year. So each month, you should record the expense happen (although you don't have to pay money or receive invoice yet). After 6 months, you receive an invoice and pay for the expenses of 6 month before.

 

[lehungtri]

Ðề: Plz help me understandrepaid Expenses,Unearned Revenues,Accrued Revenues and Accrued Expenses

i am confused among Prepaid Expenses,Unearned Revenues,Accrued Revenues and Accrued Expenses.
Even though i read the definitions on the Book several times(Accounting 22e,Warren/Reeve/Duchac),i can not understand them deeply.
Can anyone help me understand those terms above.
Thanks in advanced.

I am not sure about my economic terminologies. But I can explain these terms by my best understanding. To interprete clearly all above terminologies, You can read Vietnamese Accounting Standarde Number 0 about matching principle. And this accounting standard is prescribed according to the International Standards. All terminologies are all involved into this principle. To explain briefly this principle as follow " Revenúes arises in one definite period. Corresponding to it is these expenses to generate these revenues.
* Prepaid Expenses such as these expenses that you paid in advance for many periods such as insurance premium for many years, house rent for many years, .... I give the example. I suppose that Accountants in your company must prepare Financial statements by quarter, but the house rent your company paid in advance lasts six months with value of 12,000 USD. So at the time to prepare financial statêment, You must implement the work " Amortizing the rent house corresponding to 3 months with value of 6,000 USD"
* Unearned Revenues: this look like the money amount you receive in account from your customer to provide services for them later or the interest amount toward the type of bond " the interest amount in bond face value". At the ending period, You must recõgnize revenues from the unearned revenues account by amortizing them as the above case.
* Two remaining terms. You must read the Accrual Principle. This principle displayed that Any economic transactions which occurred must be recognized in account books and It is not based on the time of actually receiving money or paying money.

This is my best effort. I will try more in the upcoming writing.

 

[letmyha]

Ðề: Plz help me understandrepaid Expenses,Unearned Revenues,Accrued Revenues and Accrued Expenses

i am confused among Prepaid Expenses,Unearned Revenues,Accrued Revenues and Accrued Expenses.
Even though i read the definitions on the Book several times(Accounting 22e,Warren/Reeve/Duchac),i can not understand them deeply.
Can anyone help me understand those terms above.
Thanks in advanced.

Say for understand:

PREPAID EXPENSES are amounts that are paid in advance to a vender or creditor for goods and services before you receive or use them. Such as Prepaid Insurance, Prepaid Rent, Prepaid Office Supplies, Prepaid Tax (as before),... Prepaid Expenses is a Current Asset for your business.

ACCRUED EXPENSES are expenses incurred during an accounting period for which payment is postponed. They are the opposite of Prepaid Expenses.

UNEARNED REVENUE is amounts that you have received in advance from your customer to provide the goods or service for them but you have yet to be fulfilled. It is a liability of your business until you provide the goods or services to the customer finished.

ACCRUED REVENUE refers to revenue that has been incurred but not yet received. It is opposite of Unearned Revenue. Ex: You have provided your customer with services but you have not yet been invoice to your customer or paid for. Or this services are provided over a month, or even year, so you have not yet been invoice to your customer until the services are complete.