Types Of Periodic Adjustments

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Types of Periodic Adjustments
•Expense or Revenue beforeCash
•Expense incurred today, but cash paid tomorrow.
Salary earned by employees but not paid at the end of accounting period.
Employees earn salary when they perform their duties, not when they receive payment.
Unpaid salary is a Salary Payable liability
•Revenue earnedtoday, but cash received tomorrow
Interest earned today, but cash received tomorrow.
Interest is a reward for lending money, so it is earned with passage of time
Interest receivable asset
•Cash beforeaccruing Revenue or Expense (Cost Expirations or Revenue Expirations)
•Cash paid yesterday, Expense incurredtoday.
1998 rent paid in advance in 1997
Rent paid in advance asset
•ƒCash received yesterday, revenue earned today
Cash advance from customer for services not yet performed
Cash advance is Unearned Revenue liability
•Matchingis the guiding principle in periodic adjustments.
•Objective: To match the revenue earned in a period (whether received in that period in cash or not) with all the expenses incurred to earn that revenue (whether paid in that period in cash or not).