Enjoyed this video? Then subscribe to the channel right now, and as a next step let's go through some more explanation and examples of accruals: ruclips.net/video/lBvnSgIGVnU/видео.html
Accounts Payable is the liability account recorded for bills and invoices sent to a business. The business buys on credit and this is the liability for its purchases made on credit. These liabilities are short term (usually about 30 days or less) and do not charge interest. In contrast, a business has other liabilities that accumulate, or accrue over time -- such as interest expense on notes payable and vacation pay earned by employees that will be paid later. These "accruing" liabilities are recorded in order to recognize the full amount of expenses during the period. The exact title of the account varies from business to business.
Thank you so much for all of the video's you produce, they have helped me significantly. I'm really surprised your channel doesn't have more views. Hopefully, it will grow with all the content you are adding.
Thanks for the kind words! Yes, it does take some time to grow views and subscribers, but the pace is accelerating. Please spread the word, tell everybody you know! ;-)
I would like to thank you for this effort to provide us easy and smooth understanding for accounting process , please if you can provide us with a session for ( Intercompany Accounting - incoming & outgoing billing ) illustration as this job seems to be desired for companies now . I really appreciate your efforts and support here 🙏❤️
Thanks for the suggestion, Ihab, but this is not really my area of expertise. I hope somebody else has made useful videos for you on that topic on RUclips....
@@TheFinanceStoryteller But why are income taxes payable then often shown as a single balance item and so seperated by accrued expenses ? I found a lot of balance sheets on google which show both accrued expenses and income taxes payable.
It is important to record amounts as specifically as possible, so it is preferable to record debit income tax expense credit income taxes payable over debit income tax expense credit accrued expenses. Some companies use accrued expenses on the balance sheet to capture a lot of different types of accrued expenses, and then give more detail in the notes to the financial statements.
I've been reading about the difference everywhere on the internet and they said the same thing as you. In my textbook, they completely disregard the accrued expense/revenue accounts but yet they include deferred revenue/expenses account on the balance sheet...They only say "if cash is paid in the future to increase the payable account". Are they just oversimplifying it and disregarding when invoices come in?
Hi! That sentence from your textbook "if cash is paid in the future to increase the payable account" does not make sense to me. I have all my videos on adjusting entries (deferred revenue, accrued liabilities, etc.) in one playlist here: ruclips.net/video/lBvnSgIGVnU/видео.html
A commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed upon prices for products or services the seller had provided the buyer.
Why IFRS does not have a special standard about accrued expenses? Partially, you explain Ias 37, when you are speaking about court cost in the future. I know some companies , which accrue revenue in case they have sold goods but invoices haven't been prepared yet. And some of them, use a method bill and hold. Where goods have done, but customer has not paid full amount yet , but confirm his intention of purchasing and the deal. But for other hand , ifrs 15 prohibited to do it.
Thanks for your comments. It is important to note that the Coca-Cola company and Facebook are companies using US GAAP. Regarding revenue recognition for bill-and-hold arrangements under IFRS, I found the following clarification in a PWC document: "Bill-and-hold arrangements arise when a customer is billed for goods that are ready for delivery, but the entity does not ship the goods to the customer until a later date. Entities must assess in these cases whether control has transferred to the customer, even though the customer does not have physical possession of the goods. Revenue is recognized when control of the goods transfers to the customer. Paragraph B81 of IFRS 15 presents the following additional criteria that all need to be met in order for the customer to have obtained control in a bill-and-hold arrangement: a)the reason for the bill-and-hold arrangement must be substantive (for example, the customer has requested the arrangement); b) products must be identified separately as belonging to the customer; c) products currently must be ready for physical transfer to the customer; and d) products cannot be used or directed to another customer."
I never use the term "deferred revenue expenditure", so I cannot tell you the difference. As far as I can judge, "deferred revenue expenditure" is a term used in India but not necessarily in other countries. My video on adjusting entries has explanations on prepaid expenses, deferred revenue, accrued expenses and accrued revenue, maybe they can help a bit: ruclips.net/video/57CST6_RtWk/видео.html
thank you for this video, I'm doing Accounts payables under accrual accounting, I'm having trouble understanding how to record a bill, if i receive a bill this month (April) for a billing period for previous month how do I record that in Quickbooks? or if the billing period crosses months like april into may?
Hi Isabel! I have no experience working with Quickbooks, so I cannot walk you through the steps. However, I can give you some general comments. Your question: "how to record a bill, if i receive a bill this month (April) for a billing period for previous month?". The answer is that in March you should have made an accrual (accrued expenses) which is debit expense (I/S) credit liabilities (B/S), then in April you can release the accrual and record the invoice instead. For more information, here are the links to my videos explaining accruals ruclips.net/video/lBvnSgIGVnU/видео.html and more in general the one on adjusting entries (accruals, prepaids, etc) ruclips.net/video/57CST6_RtWk/видео.html
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Enjoyed this video? Then subscribe to the channel right now, and as a next step let's go through some more explanation and examples of accruals: ruclips.net/video/lBvnSgIGVnU/видео.html
Accounts Payable is the liability account recorded for bills and
invoices sent to a business. The business buys on credit and this is
the liability for its purchases made on credit. These liabilities are
short term (usually about 30 days or less) and do not charge interest.
In contrast, a business has other liabilities that accumulate, or
accrue over time -- such as interest expense on notes payable and
vacation pay earned by employees that will be paid later. These
"accruing" liabilities are recorded in order to recognize the full
amount of expenses during the period. The exact title of the account
varies from business to business.
Thanks for the summary! :-)
This comment was super helpful for me. Thank you!
Thank you so much for all of the video's you produce, they have helped me significantly. I'm really surprised your channel doesn't have more views. Hopefully, it will grow with all the content you are adding.
Thanks for the kind words! Yes, it does take some time to grow views and subscribers, but the pace is accelerating. Please spread the word, tell everybody you know! ;-)
I would like to thank you for this effort to provide us easy and smooth understanding for accounting process , please if you can provide us with a session for ( Intercompany Accounting - incoming & outgoing billing ) illustration as this job seems to be desired for companies now . I really appreciate your efforts and support here 🙏❤️
Thanks for the suggestion, Ihab, but this is not really my area of expertise. I hope somebody else has made useful videos for you on that topic on RUclips....
Thank you this makes much more sense!!
Happy to hear that!!! Thank you for watching and commenting.
thanks for the video, great explanation. However I have a question regarding income taxes payable. Do they belong to accrued expenses as well?
Yes, that sounds like the right place to put them.
@@TheFinanceStoryteller But why are income taxes payable then often shown as a single balance item and so seperated by accrued expenses ? I found a lot of balance sheets on google which show both accrued expenses and income taxes payable.
It is important to record amounts as specifically as possible, so it is preferable to record debit income tax expense credit income taxes payable over debit income tax expense credit accrued expenses. Some companies use accrued expenses on the balance sheet to capture a lot of different types of accrued expenses, and then give more detail in the notes to the financial statements.
Thank you understand in the first minute❤️
Great to hear that!!!! Thank you for watching and commenting.
you are a life saver
Happy to help! Related videos can be found in the Accounting 101 playlist: ruclips.net/video/b93KBmcXanI/видео.html&pp=gAQBiAQB
Thanks really good explanation!
Happy to help!
I've been reading about the difference everywhere on the internet and they said the same thing as you. In my textbook, they completely disregard the accrued expense/revenue accounts but yet they include deferred revenue/expenses account on the balance sheet...They only say "if cash is paid in the future to increase the payable account". Are they just oversimplifying it and disregarding when invoices come in?
Hi! That sentence from your textbook "if cash is paid in the future to increase the payable account" does not make sense to me. I have all my videos on adjusting entries (deferred revenue, accrued liabilities, etc.) in one playlist here: ruclips.net/video/lBvnSgIGVnU/видео.html
What is an invoice?
A commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed upon prices for products or services the seller had provided the buyer.
Why IFRS does not have a special standard about accrued expenses? Partially, you explain Ias 37, when you are speaking about court cost in the future.
I know some companies , which accrue revenue in case they have sold goods but invoices haven't been prepared yet. And some of them, use a method bill and hold. Where goods have done, but customer has not paid full amount yet , but confirm his intention of purchasing and the deal.
But for other hand , ifrs 15 prohibited to do it.
Thanks for your comments. It is important to note that the Coca-Cola company and Facebook are companies using US GAAP. Regarding revenue recognition for bill-and-hold arrangements under IFRS, I found the following clarification in a PWC document: "Bill-and-hold arrangements arise when a customer is billed for goods that are ready for delivery, but the entity does not ship the goods to the customer until a later date. Entities must assess in these cases whether control has transferred to the customer, even though the customer does not have physical possession of the goods. Revenue is recognized when control of the goods transfers to the customer. Paragraph B81 of IFRS 15 presents the following additional criteria that all need to be met in order for the customer to have obtained control in a bill-and-hold arrangement: a)the reason for the bill-and-hold arrangement must be substantive (for example, the customer has requested the arrangement); b) products must be identified separately as belonging to the customer; c) products currently must be ready for physical transfer to the customer; and d) products cannot be used or directed to another customer."
@@TheFinanceStoryteller Thank you for your explanation.
Thank you. Really good explanation. Do I hear Dutch accent?
Correct, Maciej! :-)
What is the difference between a deferred expense and a deferred revenue expenditure?
I never use the term "deferred revenue expenditure", so I cannot tell you the difference. As far as I can judge, "deferred revenue expenditure" is a term used in India but not necessarily in other countries. My video on adjusting entries has explanations on prepaid expenses, deferred revenue, accrued expenses and accrued revenue, maybe they can help a bit: ruclips.net/video/57CST6_RtWk/видео.html
You are the best!!!!
Thank you, David!!! 🙂
thank you for this video, I'm doing Accounts payables under accrual accounting, I'm having trouble understanding how to record a bill, if i receive a bill this month (April) for a billing period for previous month how do I record that in Quickbooks? or if the billing period crosses months like april into may?
Hi Isabel! I have no experience working with Quickbooks, so I cannot walk you through the steps. However, I can give you some general comments. Your question: "how to record a bill, if i receive a bill this month (April) for a billing period for previous month?". The answer is that in March you should have made an accrual (accrued expenses) which is debit expense (I/S) credit liabilities (B/S), then in April you can release the accrual and record the invoice instead. For more information, here are the links to my videos explaining accruals ruclips.net/video/lBvnSgIGVnU/видео.html and more in general the one on adjusting entries (accruals, prepaids, etc) ruclips.net/video/57CST6_RtWk/видео.html
@@TheFinanceStoryteller thank you very much for your feedback. I will check those out.
Damn great channel!
Thank you!!!! :-)
Thanks for this!
My pleasure, Steve!