Accounting Precedures Essay Example | Topics and Well Written Essays - 500 words

Accounting Precedures - Essay Example ethod of accounting in recording an income or revenue item records the transaction immediately once the said income or revenue is earned even it not yet realized in money (or cash).2 After there has already been a meeting of the minds between the customer who is the source of the income or revenue and the business entity that a sales deal has been closed, the business entity may already record the transaction. For instance, S is in the business of selling television sets and video recorders which are separately classified in the books of accounts. B orders for one television set and one video recorder respectively priced at 500 dollars and 300 dollars which will be paid in thirty days. S therefore issues a sales invoice for the transaction and delivers the chattels to B together with the accompanying delivery receipt. At that instant, S may record the sales transaction in the accounting books, particularly the sales-book or the sales journal, that is, 500 dollars for the sale of the television set and 300 dollars for the video recorder. Any increase in income or revenue (sale of the appliances here) has a corresponding increase in an asset. In the above illustration, the increase in asset pertains to the collectible in the total amount of 800 dollars (500 dollars plus 300 dollars). In accounting parlance, trade collectibles are commonly termed as accounts receivable. In the ledgers, 500 d ollars will be recorded as a credit item in the television set sales-book or sales journal, and 300 dollars will be recorded in the video recorder sales-book or sales journal likewise under the credit column. The total collectible in the amount of 800 dollars will be recorded in the accounts receivable ledger. This is precisely the essence of the accrual method of accounting. In short, the income or revenue has not yet been actually realized because no cash has yet been collected for the items sold and already delivered out. It is important to state at this point that hard copy