Assignment for Accounting

1.) Unearned Revenue can be defined as deferred revenue. It’s an accounting term that refer to the revenue received by a corporation or individual for the goods or services that haven’t been provided. In the company’s financial statement, the unearned revenue is recorded as profit in the income statement but view as liability in the balance sheet until the goods have been delivered or the services been performed.

For an example, I purchase a 1-year subscription to a weekly magazines ,which is Rm520 in total, and received the first issue immediately , the company should count the Rm 510 that I had paid as unearned revenue because it still owes me another 51 issues. Gradually, the revenue will shift from liability to asset when the company fulfil its obligation.

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2.) Accrued Expenses are the expenses that a corporation has been incurred but not paid. Based on the accrual principle which the expenses have to be recorded when they have been incurred but not been paid, a company will record the expenses that has already been incurred but not yet paid as liability on the balance sheet in the form of accrual expenses until it has been paid.

For an example, a company suppose to pay its rental fee, rm8000, monthly but the company was not able to make the payment on March because of some financial problems. By following the accrual principle, the company will record the rm8000 rental expenses as a liability in the term of accrual expenses on the balance sheet in the end of the March.

3.) Accrual Principle is an accounting method which is used in preparation of financial statements to give a more accurate picture of company’s current financial condition. It is the concept that a company should record the transaction when it has been occurred rather than record them at the moment when the cash flow related to them occurred.

For an example, under the accrual principle, a corporation will record the sales when it invoices the customer rather than when the clients make the payment.

4.) Contra Assets are the assets account with credit balance, which is contrary to the normal debit balance of assets account, that offset the related assets account. They allow the external investors to gain a more reliable and accurate information about the current financial position of the company.

For an example, the company purchase a machinery at cost rm5000 with 10 years useful life at 30th June 15. The depreciation rate is 10%. In order to prepare a accurate financial position statement, the company will develop a accumulated depreciation account which is rm50 in credit to offset the machinery asset so that the net value of the machinery, rm4950, can be shown on the balance sheet. This will not only allow them to know about the current value of the assets but also allow them to estimate the useful of the assets.

5.) Capital expenditure or CapEx are the accounting term related to the amount that spent on purchasing or upgrading the physical assets such as property, equipment or land. They are recorded as Non-Current assets on the balance sheet. Besides, the cost of the assets, without lands, will normally be charged to depreciation expenses over their useful life.

For an example, a newly company spend rm7000 to purchase a new machine with 10years useful life. The amount of rm7000 which spent by the company to purchase the long term asset, new machine, is consider as capital expenditure.