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The formal accounting distinction between on- and off-balance-sheet items can be quite detailed and will depend to some degree on management judgments, but in general terms, an item should appear on the company's balance sheet if it is an asset or liability that the company owns or is legally responsible for; uncertain assets or liabilities ...
A deferred expense (also known as a prepaid expense or prepayment) is an asset representing costs that have been paid but not yet recognized as expenses according to the matching principle. For example, when accounting periods are monthly, an 11/12 portion of an annually paid insurance cost is recorded as prepaid expenses .
A fundamental difference between cash accounting and accrual accounting is the treatment of capital, such as equipment, buildings and public infrastructure. [ 7 ] : 105 Under accrual accounting in the public sector, expenditure on capital is not included in net operating expense in the year it is purchased.
A constructive obligation is an obligation that is implied by a set of circumstances in a particular situation, as opposed to a contractually based obligation. The accounting equation relates assets, liabilities, and owner's equity: Assets = Liabilities + Owner's Equity. The accounting equation is the mathematical structure of the balance sheet.
In accounting, adjusting entries are journal entries usually made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred. The revenue recognition principle is the basis of making adjusting entries that pertain to unearned and accrued revenues under accrual-basis accounting. They are ...
According to Accounting Explained, long-term liabilities are financial obligations of a company that are due after one year or longer. These types of liabilities are placed on a balance sheet of a company together with current liabilities that represent payments which are due within one year.