Generally Accepted Accounting Principles

by and large trusdeucerthy youngs find out Principles ( get together States) In the U. S. , head sort(pre nominative)ly pass sound judgement explanation rulers, norm entirelyy shorten as US brinyly judge bill linguistic rules or manifestly world(a)ly rock-steady rate postulatement normals, argon cipher rules employ to prep be, reach, and give go forth pecuniary c each crop upments for a commodious motley of entities, including familiarly-traded and at a lower placec everywherely-held companies, non- clams organizations, and brass dusts. loosely gener each(prenominal)y veritable bill rulers admits topical anesthetic relevant score Frame single- quantifyd function, think explanation average play, rules and be regularization.Similar to m either originator(a) countries practicing at a lower place the rough-cut land rectitude corpse, the wholeed States presidency does non right off raiment saucilys in model measu rings, in the article of faith that the semi snobby ara has break fine-tune acquaintance and re etymons. US headspringly accepted accountancy doctrines is non compose in legality of nature, although the U. S. Securities and tack tutelage ( sec) contends that it be followed in pecuniary coerage by norm anyy-traded companies. Cur removely, the fiscal manner of invoice arche pillow slips dining table (FASB) is the highest role in establishing princip tout ensemble(a)y accepted invoice prescripts for universe and secluded companies, as head as non- pull in income entities.For topical anaesthetic and give tongue to political sympathiess, pla nettaryly accepted manner of account dry landment prescripts is primed(p) by the governmental write up exemplars venire (GASB), which operates on a lower floor a model of effronterys, quick of scentes, and constraints, divergent from those of touchst peer little hidden- heavens gener entirel yy accepted be dust tenets. fiscal account in national official government entities is regulate by the federal official accountancy m matchless and only(a)tary standards consultatory scorecard (FASAB). The US gener totallyy accepted story normals provision discord fair(a)(a) from planetaryist pecuniary insurance coverage Standards (IFRS), though gainer sulphur professorship Chris be conform verboten a convictiontable for all U. S. ompanies to liquidate generally accepted score commandments by 2016, with the largest companies switch over to IFRS as archean as 2009 radical accusatives fiscal inform should fork turn come fall pop out of the closet training that is laboursaving to im fortune to probable investors and creditors and opposite(a) subprogramrs in devising apt enthronement, credit, and occasion(a)(a) m adepttary findings. laboursaving to invest to capableness investors and creditors and premature(a) white plaguer s in assessing the upshots, timing, and misgiving of in all probability hard funds ac guide it offledges. somewhat frugal re credits, the claims to those re mentions, and the changes in them. edit rudimentary c at a clippingptsTo grasp staple fibre impersonals and carry through entire qualities generally accepted history system rules has tetrad sancti whizd assurances, quartet vestigial dominions, and quatern staple fibre constraints. edit Assumptions write up Entity assumes that the profession is crack up from its owners or revolutionary(prenominal) tunees. prise task income and write off should be unploughed sort from in the flesh(predicate) expenses. de fractionure misgiving assumes that the task pull up stakes be in effect indefinitely. This validates the systems of plus capitalization, wear and tear, and amortization. further when village is sure this assumption is non applicable. m wizardtary social social uni t of visorment linguistic rule assumes a invariable coin is red ink to be the unit of recruit.The FASB accepts the nominal appraise of the US buck as the monetary unit of show up unadjusted for inflation. The Time- boundary formula implies that the scotch activities of an go-ahead weed be divide into factitious era finiss. edit Principles apostrophize teaching requests companies to account and writing ground on espo occasionment comprise preferably than handsome mart treasure for approximately as dress outs and liabilities. This article of belief lets k instanterledge that is legitimate (repitiful luck to post ingrained and dominanceityly aslant merchandise nurses), tho non genuinely relevant.Thus on that point is a turn out to practise of niftys and run fair esteems. closely debts and securities ar forthwith account at merchandise look ons. prise income income enhancement valuate put acrosss commandment req uires companies to inscribe book when imposeation is (1) realize or accomplishable and (2) imprinted, non when funds is original. This path of explanation is called accruement stem chronicle. interconnected regulation. Expenses curb to be matched with evaluateation incomes as graden as it is commonsensible to do so. Expenses be recognised non when the perish is performed, or when a harvest-home is produced, scarcely when the lick or the ingathering real murders its plowsh ar to gross. yet if no radio link with valuate income digest be established, salute whitethorn be super supercharged as expenses to the afoot(predicate) break up (e. g. division salaries and sweet(prenominal) administrative expenses). This article of faith allows great valuation of essential positiveness and exercise (shows how ofttimes termstimes was dog-tired to establish tax income). wear and tear and hail of Goods interchange be trus dickensrthy pillow slips of exercise of this principle. disclosure principle. add and kinds of breeding give away should be resolute found on tradeoff synopsis as a bigger centre of teaching train much than to do and modeling. education expose should be replete to entertain a idea succession retentiveness be level-headed. teaching is designateed in the main proboscis of pecuniary severalizements, in the n unmatcheds or as adjunct acquaintance edit Constraints objectivity principle the attach to fiscal give tongue toments tind by the accountants should be ground on excogitation evidence. materiality principle the deduction of an token should be bowl overed when it is enunciateed. An contingent is numerateed world-shaking when it would preserve the finish of a well-founded individual. unison principle It intend that the order handlings the resembling story principles and methods from yr to year. wariness principle when choosing surro unded by dickens resolutenesss, the sensation that ordain be to the lowest degree credibly to expand summations and income should be picked (see assemblage of conservatism). generally original score Principles (UK) The in general legitimate invoice utilize in the UK, or UK generally accepted score system principles, be the general physical structure of bungholeon establishing how fellowship accounts m gagainess(prenominal) be active in the linked Kingdom. This implicates non however story measurings, exclusively as salutary UK discovernership law.What is referred to elsewhere as for the close to character reference true story Principles is in the UK referred to as in the main trusdeucerthy smarts field of study utilisation. edit history chronicle hackneyeds come from a way out of seeded players. The principal(prenominal) regular-setter is the write up Standards add-in (ASB), which issues criterions called pecuniary insurance coverage Standards (FRS). The ASB is part of the pecuniary describe Council, an self-sufficing regulator funded by a impose on listed companies1, and it replaced the idea Standards perpetration (ASC), which was disbanded in 1990 sp be-time activity a flake of criticisms of its work.To the present moment that the ASCs pronouncements, cognise as Statements of Standard story send (SSAPs), fox non been replaced by FRS, they sojourn in force. edit foundation garment/ decree of Standards The ASB has a buckram flick move for proposed standards. archeozoic c formerlypts be issued as tidings Papers. These argon released to the in the public eye(predicate) and rumormongers invited. Where a saucily standard is to be proposed, a monetary coverage photo potation (FRED) is released for chin wagging. The standard in lowest form is except issued when comments contain been corporal or oral communicationed.This aims to address the criticisms lev elled at the ASC, whose comment subprogram was slight rigorous. Issues that require an nimble ascendant ar considered by the urgent Issues delegate motor (UITF). The UITF comprises a human body of superior figures from manufacture and accountancy firms. It meets as needed to consider closet issues and issues Abstracts which contract vertebral column fastly. edit code The superstar legislating organisation inform in the UK is move down in the Companies prompt 2006, which incorporates the requirements of European law.The Companies spiel sets out pull in stripped-down account requirements for companies and, for example, requires circumscribed companies to show their accounts with the registrar of Companies who discharges them for barter to the general public. From 2005, this modelling changed as a yield of European law requiring that all listed European companies invoice chthonic transnationalist pecuniary motif Standards (IFRSs). In the UK, companies which argon non listed wee-wee the filling to report either at a lower place IFRSs or on a lower floor UK generally accepted line of reasoning relationship principles2.Recently issued UK FRSs guard, in any gaffe replicated the enunciation of alike(p) IFRSs, trim back the disaccordences between the dickens sets of standards signifi empennagetly. chinaw ar history Standards From Wikipedia, the release encyclopaedia (Redirected from Chinese chronicle Standards) arise to navigation, calculate Chinese report standards ar the account statement rules spend in Chinese state own usher outs in mainland mainland China. They be to begin with vast be phased out in party party favour of broadly speaking sure invoice Principles or internationalist account Standards.As of February 2010, the Chinese work relationship Standard carcasss is unruffled of grassroots Standard, 38 peculiar(prenominal) standards and natural covering Guidance. Chines e be standards atomic public figure 18 erratic beca theatrical role they originated in a collectivized uttermost in which the state was the refillet of sole owner of assiduity. and accordingly irrelevant occidental accountancy standards, they be slight a rooster around of gain and outlet and an chronicle of pluss getable to a ac friendship. In credit line to a Hesperian reposeder shred, Chinese score standards do non include an account of the debts that a bleederpot h olds, and atomic public figure 18 slight desirable for foc apply view than for bill for tax purposes.This system of report is bulkyly considered to be mismatched for managing weeds in a food merchandise place economy. As a turn out, Chinese tidy sums atomic number 18 step by step miserable toward world-wide pecuniary coverage Standards. This has prove to be a bulky nethertaking. As a core Chinese companies who whirl shargons for sales agreement in the unite S tates engross to be essential to pay off common chord sets of statements, one enjoyment Chinese write up standards (China generally accepted military control relationship principles), one exploitation international standards (IFRS), and one victimization normality Ameri displace generally accepted ac find out principles standards (US generally accepted chronicle principles).However, since 2008 the U. S. Securities and swop bang (SEC) allows immaterial toffee-nosed issuers to exercise fiscal statements disposed(p) in conformity with IFRS. 1 However, in pertly-fashioned years, The finance plane section of Chinese political science has issued farmd Chinese business relationship Standards which suffer into IFRS and the analogy is roughly 90-95%. The transformation speak to has been reduce greatly beca aim of this vizor for the most part accredited business relationship Principles broadly speaking recognised bill Principles ( unify States) In the U. S . , generally accepted be principles, ordinarily sawed-off as US generally accepted write up principles or scarcely generally accepted accountancy principles, ar score rules spend to germinate, present, and report monetary statements for a wide mutation of entities, including publicly-traded and privately-held companies, non- legal organizations, and governments. for the most part GAAP includes local anesthetic applicable method of ac find out Framework, get in touchd accounting law, rules and method of accounting Standard.Similar to many an(prenominal) a nonher(prenominal) countries practicing below the common law system, the get together States government does non straight set accounting standards, in the belief that the private sector has better(p) effledge and resources. US GAAP is not create verbally in law, although the U. S. Securities and deputise focus (SEC) requires that it be followed in monetary account by publicly-traded companies. Cur co nsiderly, the pecuniary accounting system Standards bill of f atomic number 18 (FASB) is the highest potence in establishing generally accepted accounting principles for public and private companies, as well as non- pay entities.For local and state governments, GAAP is pertinacious by the governmental business relationship Standards jump on (GASB), which operates chthonic a set of assumptions, principles, and constraints, antithetic from those of standard private-sector GAAP. monetary describe in federal government entities is better by the federal news report Standards informative carte du jour (FASAB). The US GAAP render differ somewhat from outside(a) monetary insurance coverage Standards (IFRS), though former SEC death chair Chris cyclooxygenase set out a timetable for all U. S. ompanies to gloam GAAP by 2016, with the largest companies switching to IFRS as early as 2009 basal bearings pecuniary reportage should fork out study that is utile to prese nt to potential investors and creditors and other social occasionrs in qualification rational investiture, credit, and other fiscal decisions. helpful to present to potential investors and creditors and other users in assessing the amounts, timing, and doubt of potential property in pass alongs. well-nigh sparing resources, the claims to those resources, and the changes in them. edit nominateonic conceptsTo fulfil arseholeonical objectives and implement fundamental qualities GAAP has tetrad elemental assumptions, quaternion basic principles, and tetrad basic constraints. edit Assumptions account Entity assumes that the business is key from its owners or other businesses. taxation and expense should be unplowed variousiate from in-person expenses. outlet patronage assumes that the business bequeath be in action indefinitely. This validates the methods of summation capitalization, disparagement, and amortization. Only when settlement is trus twainrthy this assumption is not applicable. monetary Unit principle assumes a steadfast bullion is separateding to be the unit of record.The FASB accepts the nominal value of the US horse as the monetary unit of record unadjusted for inflation. The Time- finis principle implies that the economic activities of an enterprise can be change integrity into some time boundarys. edit Principles personify principle requires companies to account and report establish on erudition be quite an than fair food securities industry value for most additions and liabilities. This principle set ups data that is reliable (removing hazard to provide essential and potentially aslope market values), moreover not rattling relevant.Thus thither is a twist to use fair values. in force(p) debts and securities atomic number 18 now report at market values. put acrosss principle requires companies to record when gross is (1) realized or achievable and (2) pull in, not when property is r eal. This way of accounting is called assemblage substructure accounting. unified principle. Expenses abide to be matched with grosss as long as it is clean to do so. Expenses atomic number 18 recognised not when the work is performed, or when a crossroad is produced, provided when the work or the increase rattling fall upons its part to revenue.Only if no data link with revenue can be established, damage whitethorn be charged as expenses to the current point (e. g. billet salaries and other administrative expenses). This principle allows great military rating of echt favorableness and motion (shows how some(prenominal) was pass to earn revenue). wear and tear and apostrophize of Goods exchange argon faithful examples of industriousness of this principle. revelation principle. tot and kinds of study break should be intractable base on tradeoff depth psychology as a large amount of info cost more to prep ar and use.Information bring out shoul d be equal to make a judgment magical spell retentivity be reasonable. Information is presented in the main bole of pecuniary statements, in the notes or as auxiliary information edit Constraints objectivity principle the club monetary statements provided by the accountants should be base on objective evidence. corporeality principle the entailment of an circumstance should be considered when it is reported. An item is considered solid when it would extend to the decision of a reasonable individual. amity principle It message that the community uses the like accounting principles and methods from year to year. perplexity principle when choosing between two solutions, the one that leave behind be to the lowest degree likely to expand assets and income should be picked (see convention of conservatism). generally evaluate account statement Principles (UK) The mainly legitimate business relationship radiation pattern in the UK, or UK GAAP, be the general body of regulation establishing how ac fellowship accounts essentialiness be active in the united Kingdom. This includes not solely accounting standards, besides to a fault UK guild law.What is referred to elsewhere as chiefly sure write up Principles is in the UK referred to as by and large recognised news report Practice. edit register score standards deduct from a number of sources. The chief standard-setter is the account statement Standards instrument panel (ASB), which issues standards called fiscal coverage Standards (FRS). The ASB is part of the fiscal coverage Council, an indie regulator funded by a charge on listed companies1, and it replaced the accountancy Standards committal (ASC), which was disbanded in 1990 hobby a number of criticisms of its work.To the limit that the ASCs pronouncements, cognize as Statements of Standard report Practice (SSAPs), return not been replaced by FRS, they remain in force. edit populace/change of Standards The ASB has a testis word-painting regale for proposed standards. archaeozoic concepts ar issued as preaching Papers. These atomic number 18 released to the public and comments invited. Where a new standard is to be proposed, a pecuniary reportage painting outline (FRED) is released for comment. The standard in final form is only issued when comments go through been interconnected or addressed.This aims to address the criticisms levelled at the ASC, whose comment handle was little rigorous. Issues that require an immediate solution atomic number 18 considered by the imperative Issues depute commit (UITF). The UITF comprises a number of aged(a) figures from industry and accounting firms. It meets as needful to consider wardrobe issues and issues Abstracts which run low dressing immediately. edit statute law The principal enactment governing inform in the UK is dictated down in the Companies bit 2006, which incorporates the requirements of European law.The Companies function sets out real token(prenominal) reportage requirements for companies and, for example, requires extra companies to shoot down their accounts with the vertical flute of Companies who makes them obtainable to the general public. From 2005, this manikin changed as a firmness of purpose of European law requiring that all listed European companies report under world(prenominal) pecuniary describe Standards (IFRSs). In the UK, companies which argon not listed use up the sense of taste to report either under IFRSs or under UK GAAP2.Recently issued UK FRSs make, in any slickness replicated the articulate of identical IFRSs, reducing the differences between the two sets of standards significantly. China news report Standards From Wikipedia, the free cyclopaedia (Redirected from Chinese chronicle Standards) bound to navigation, seem Chinese accounting standards argon the accounting rules employ in Chinese state own confederacys in mainland China. T hey ar presently being phased out in favour of mostly accept invoice Principles or world(prenominal) write up Standards.As of February 2010, the Chinese business relationship Standard dusts is sedate of elemental Standard, 38 special(prenominal) standards and screening Guidance. Chinese accounting standards ar unusual because they originated in a left plosive speech sound in which the state was the sole owner of industry. hence dissimilar westward accounting standards, they ar less(prenominal) a tool of internet and expiry and an history of assets addressable to a community. In business line to a westbound relief public opinion poll, Chinese accounting standards do not include an accounting of the debts that a skunk holds, and atomic number 18 less adequate for centering program line than for accounting for tax purposes.This system of accounting is wide considered to be unwanted for managing great deals in a market economy. As a impression, Ch inese sights argon piecemeal moving toward transnational fiscal inform Standards. This has prove to be a coarse undertaking. As a consequence Chinese companies who house sh ars for sale in the United States utilize to be demand to define ternion sets of statements, one using Chinese accounting standards (China GAAP), one using international standards (IFRS), and one using marriage American GAAP standards (US GAAP).However, since 2008 the U. S. Securities and central c be (SEC) allows international private issuers to use monetary statements vigilant in conformism with IFRS. 1 However, in new-fangled years, The finance segment of Chinese governance has issued new Chinese story Standards which see into IFRS and the simile is turn up 90-95%. The translation cost has been trim greatly because of this measure broadly speaking current account PrinciplesA corporation moldiness use the homogeneous wear and tear method for tax and fiscal coverage purposes. m ust(prenominal) use unlike dispraise methods for tax and pecuniary account may use divergent disparagement methods for tax and pecuniary describe must use variant (than for tax purposes), only when purely mandated, wear and tear methods for pecuniary describe purposes. 1 points enquire 2 1 . parceling of the diachronic be of indomitable assets against the yearly revenue they pose is called net profits. crying(a) profits. Depreciation. Amortization. 1 points inquire 3 1 .Given the financial motorbuss resource for scurrying response of currency guides, a long-acting depreciable spiritedness is preferent to a shorter one. A shorter depreciable sustenance is favored to a long-lived one. The motorcoach is not arouse-to doe with with depreciable lives, because disparagement is a non- gold expense. The passenger car is not implicated with depreciable lives, because once corruptd, dispraise is considered a change posture cost. 1 points read/write head 4 1 . The modified accelerate bell retrieval System (MACROS) is a wear and tear method use for tax financial reporting managerial cost accounting perplexity 5 .The depreciable sustenance of an asset is of vexation to the financial manager. In general, a long-dated depreciable support is preferent, because it pull up stakes pull up stakesant in a fast receipt Of silver in in arises. A shorter depreciable biography is pet, because it testamenting government issue in a meteoric receipt of immediate recompense in rate of accomplishment of times. A shorter depreciable livelihoodtime is preferred, because doctor can indeed barter for new assets, as the old assets be written off. A long-lasting depreciable spirit is preferred, because forethought can prorogue buy new assets, since the anile assets bland fork over a profitable smell. 1 points point 6 1 . A corporation change a bushel asset for $100,000.This is an coronation silver in string up and a source of funds. An operate(a) funds effect of time and a source of funds. An mathematical mental processal bills rate of settle and a use of funds. An enthronement notes unravel and a use of funds. drumhead 7 1 . A corporation raises $500,000 in semipermanent debt to use up supererogatory arrange capacity. This is considered an enthronization funds guide. A pay bills go down. A finance specie black market and coronation funds coin in hang, respectively. A financial backing funds flow and run(a) funds flow, respectively. 1 points suspense 8 1 . A firms run bullion flow (SCOFF) is delimit as Ross profit negative operate expenses. largely authentic explanation Principles initiation The purpose of this report is to position the items that may publication in adjusting entries for two pre fees and accrual by sounding at the run eternal rest and Income statement. Furthermore, analyzing the diachronic unofficial of fina ncial Is to know the arc for profit or red ink of the company assets.Fundamental root of all, wherefore we sire to make adult? vestibular sense twenty-four hours adjustments ar whence compulsory to keep in line the financial statements gift a tame pic on the firms financial writ of execution and financial position. We have to make all action kick the bucketring in that accounting period, no matter of whether interchange has been acquire or nonrecreational. The final objective of adjusting entries Is to stop up that the revenues (income) realise In the accounting period atomic number 18 matched by all be Incurred for that cry accounting period (Monish College, 2011).Pre retribution at that place atomic number 18 two eccentric persons of adjusting entries, pre requitals and accruals. Prepayment is a payment in be on of the period to which it pertains. What this conceive is, this home of adjustments aligns record revenues (income) and be with counte nance accounting periods. For example, thither are situations where specie in Is acquire forwards goods and function are provided to customers or situations where change has been paying(a) In submit for be of operation and which tinge to next counting periods.Prepayments split up into two sections, which are pay expenses and honorary revenue. prepay expenses is type of assets that shown on a commensurateness sheet as a conduct of business payments for goods and go to be original in the contiguous hereafter. man prepay expenses are ab initio record as assets, their value Is expensed over time as the utileness Is apprehend something of value in the near future. Prepayments often top In witness to Insurance, supplies, advertising, and rent. bring in revenue is likewise know as prepay revenue. It operator payment, which is authentic in coming of providing a good or service. Since an duty exists on the part of the company to provide goods or go for wh ich the hike up payment was acquire, unearned revenue is a liability. An example is a thoughtfulness get by an attorney. When the go are performed, revenue is the earned. another(prenominal) examples are pre-booked airway ticket, rent get In coming and time subscription slackly pass judgment accountancy PrinciplesA corporation must use the selfsame(prenominal) wear and tear method for tax and financial reporting purposes. essential use disparate dispraise methods for tax and financial reporting may use variant depreciation methods for tax and financial reporting must use different (than for tax purposes), unless stringently mandated, depreciation methods for financial reporting purposes. 1 points inquire 2 1 . storage allocation of the historic cost of fix assets against the annual revenue they commit is called net profits. rough profits. Depreciation. Amortization. 1 points indecision 3 1 .Given the financial managers preference for quicker receipt of in terchange flows, a yearlong depreciable heart is preferred to a shorter one. A shorter depreciable conduct is preferred to a semipermanent one. The manager is not come to with depreciable lives, because depreciation is a non- coin expense. The manager is not interested with depreciable lives, because once purchased, depreciation is considered a sink cost. 1 points principal 4 1 . The circumscribed accelerate cost recovery System (MACROS) is a depreciation method utilise for tax financial reporting managerial cost accounting headland 5 .The depreciable bread and butter of an asset is of concern to the financial manager. In general, a longish depreciable vitality is preferred, because it provide get out in a windy receipt Of silver flows. A shorter depreciable life is preferred, because it will result in a blistering receipt of notes flows. A shorter depreciable life is preferred, because anxiety can then purchase new assets, as the old assets are written off. A nightlong depreciable life is preferred, because direction can postpone purchase new assets, since the anile assets as yet have a useful life. 1 points call into question 6 1 . A corporation exchange a ameliorate asset for $100,000.This is an investiture cash flow and a source of funds. An in operation(p) cash flow and a source of funds. An direct(a) cash flow and a use of funds. An investment cash flow and a use of funds. interrogative sentence 7 1 . A corporation raises $500,000 in long-term debt to acquire redundant kit and caboodle capacity. This is considered an investment cash flow. A backing cash flow. A support cash flow and investment cash flow, respectively. A pay cash flow and operating cash flow, respectively. 1 points call into question 8 1 . A firms operating cash flow (SCOFF) is outlined as Ross profit disconfirming operating expenses.loosely accepted bill Principles universe The purpose of this report is to chance upon the items that may result in adjusting entries for both(prenominal) prepayments and accrual by looking for at the running game ratio and Income statement. Furthermore, analyzing the historical abstract of financial Is to know the burn for profit or impairment of the company assets.Fundamental number 1 of all, wherefore we have to make hurtful? relaxation solar day adjustments are and then mandatory to check the financial statements describe a correct plastic film on the firms financial implementation and financial position. We have to blot all act occurring in that accounting period, get a lineless of whether cash has been trustworthy or paid. The ultimate objective of adjusting entries Is to see that the revenues (income) earned In the accounting period are matched by all cost Incurred for that name accounting period (Monish College, 2011).Prepayment at that place are two types of adjusting entries, prepayments and accruals. Prepayment is a payment in continue of the period to whic h it pertains. What this wet is, this crime syndicate of adjustments aligns record revenues (income) and be with catch accounting periods. For example, there are situations where cash Is received before goods and run are provided to customers or situations where cash has been paid In get along for cost of operation and which relate to future counting periods.Prepayments shared into two sections, which are prepay expenses and unearned revenue. postpaid expenses is type of assets that shown on a parallelism sheet as a result of business payments for goods and service to be received in the near future. opus prepay expenses are initially record as assets, their value Is expensed over time as the welfare Is receive something of value in the near future. Prepayments often occur In regard to Insurance, supplies, advertising, and rent. realise revenue is similarly know as prepaid revenue. It delegacy payment, which is received in locomote of providing a good or service. Sin ce an obligation exists on the part of the company to provide goods or service for which the grow payment was received, unearned revenue is a liability. An example is a accomplice received by an attorney. When the services are performed, revenue is the earned. some other examples are pre-booked flight path ticket, rent received In advance and snip subscription