Free cpa study material for far3/14/2024 Since bonds are traded on exchanges, bonds can be bought or sold at different prices. Financial professionals have to explain bond premiums and discounts to customers, and answer questions if the explanation is not clear.įor starters, bonds are typically issued at a face amount (par amount) of $1,000, or a multiple of $1,000. Bond Premiums and DiscountsĪccounting for bonds is often poorly explained, particularly if the instructor does not have experience in the financial services industry. Here’s the entry recorded when payroll is processed:Īccrual accounting matches the revenue produced in December with the wage expense incurred in December. (To record wages owed to employees on December 31st) Accrual accounting requires you to post an entry for the wage expense before the end of the year, so you record this adjusting entry: To keep things straight in your mind, remember that an adjusting entry involves one balance sheet account and one income statement account.Īssume, for example, that you owe $5,000 in wages on December 31st, and that you will process payroll on January 5th of the following year. Some exam candidates have trouble with the adjusting entries that are required by the accrual method. CPAs must match the revenue generated with the expenses incurred to produce the revenue, regardless of the timing of cash inflow and outflows.
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