Recognizing current liabilities, assets, and expenses is crucial for a company's financial statements. Current liabilities represent the company's short-term obligations, while assets encompass the resources owned by the business. Expenses, on the other hand, reflect the costs incurred in generating profit. Recognizing these components is vital as it ensures transparency in financial reporting and aids in decision-making, budgeting, risk management, compliance, and performance evaluation. This week’s journal will focus on how to recognize these components, grammar and word usage errors.
Reflection activity:
For this week’s learning journal review and prepare any necessary journal entries for the following scenarios:
Scenario 1
On July 1st, Wellness Gym obtained inventory from Equip Store Ltd with a value of $20,000, utilizing a credit arrangement. Equip Store Ltd provides a 4% credit allowance if payment is completed within 10 days.
On July 3rd, Wellness Gym returned damaged inventory valued at $5,000.
On July 9th, Wellness Gym made the full payment to Equip Store Ltd.
Scenario 2:
On August 1st, Wellness Gym receives an advance payment of $3,000 gym subscription for three months from a client.
On August 30th, Wellness Gym recognizes $1,000 of the advance payment as revenue for the services that have been completed during the month.
On September 30th, Wellness Gym recognizes an additional $1,000 of the advance payment as revenue for the services completed in the second month.
By the end of the three-month period, Wellness Gym has recognized all $3,000 of the advance payment as revenue.
Scenario 3:
Mindset. Co approached Wellness Gym to arrange a basic wellness session for their employees. On October 5, Wellness Gym and Mindset. Co entered a contract for the wellness program, with a value of $4,000, on credit. The contract stated that a 2% discount would be granted if the payment was made within 10 days.
On October 28, Wellness Gym received the complete payment from Mindset. Co.
Scenario 4:
On November 1st, Wellness Gym secures a one-year loan of $100,000 from a bank at an annual interest rate of 14% for the purpose of expanding the gym. Wellness Gym records interest accumulation every two months, at the end of each two months
