Accrual Accounting: How it Works & Why it's #1!

[@AccountingStuff]

Who would be interested in some videos covering practice questions on each topic?

[@shaheedalhelal]

intrested =^>

[@AccountingStuff]

@@shaheedalhelal Thanks for watching, I'm putting out a video on practice questions on Monday :)

[@AccountingStuff]

@@shaheedalhelal Hey Shaheed, I've just put up a vid covering practice questions on Debits and Credits --> kzbin.info/www/bejne/r3Syi2qXrtF2ZsU Give me a shout if there are any other topics you would like me to do questions on as well

[@SuperlativeRam]

Yes, longer videos would be great.

[@nataliedeveaux5631]

Interested

[@donwhizz7880]

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With the assistance of an investment advisor, I was able to diversify my $401k portfolio across multiple markets, earning over $980k in net profit from high dividend yielding stocks, ETFs, and bonds in just a few short months.

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Would you mind recommending a specialist with a variety of investment options? This is extremely rare, and I eagerly await your response.

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[@justinscott6855]

He appears to be well-educated and well-read. I ran a Google search on his name and came across his website; thank you for sharing.

[@LetThereBeCode.]

you bricked it down to the core living out of it good presentation and examples. that's how everybody should teach, once they fully understands something, not like other 45m videos to explain simple thing by pure ranting .

[@AccountingStuff]

Thanks mate, I do my best to value your time and keep these as short and concise as possible. All the best!

[@deannad2555]

I'm so glad I found your channel!!! Started studying accounting and this really helps cuz I'm a visual learner!! Thank you so much!

[@AccountingStuff]

No problem Deanna, I am also a visual learner so can appreciate the struggle with textbooks etc. All the best

[@walkstallkeith4560]

This is the best explanation ever!!! I literally sat there reading my textbook for 15 hours yesterday and I could NOT make any sense of this. Then in this 7 minute video you just made everything click together. Thank you so much. You are a phenomenal teacher.

[@AccountingStuff]

Great to hear it's clicking for you!!

[@momentshub3773]

I love your video production man! Great content making job!

[@AccountingStuff]

Thanks buddy!

[@jlei1995]

I'm so happy I found your channel. You are the reason why I will pass my accounting class. My teacher is awful, so everything I'm learning, I'm learning from you. Thank you so much.

[@thanisverde7147]

So when we buy the ingredients for 10 dollars, in the Accrual method we just pretend we still have those 10 dollars until we use them?

[@castlechoirmusic]

Would love to go through some examples of expense and revenue accrued! Also the reversal of them 😊

[@AccountingStuff]

Here you go... kzbin.info/aero/PL5zKSeS09l31dhHvwhS4sVjcckQSPGqtp

[@joannamilligan689]

Yes! Please make practice question videos. You have made my job of bookkeeping for my new business a hell of a lot clearer! Thank you....Can't wait to learn more.

[@AccountingStuff]

Hey Joanna, I'm glad you are finding some value in these! Yes, I am keen to make some videos on practice questions. Are there any areas that you would like me to cover?

[@AccountingStuff]

Hey Joanna, the first practice question video is up --> kzbin.info/www/bejne/r3Syi2qXrtF2ZsU. This one covers Debits & Credits. Let me know what you think? If there are other topics you'd like covered then give me a shout

[@randcwithvictor1829]

I hold a BSc in Microbiology, but having worked in the banking sector, I developed an affinity for Finance and decided to pursue a masters degree in Finance, it was really tough and challenging for me until I came across your channel. Thank you so much ( I wish you could create an A to Z terms in Finance and Accounting)

[@raed666n]

Would someone please explain why those different answers between Q1 and Q2 Q1 - A department store sells gift certificates that may be redeemed for merchandise. Each certificate expires 3 years after issuance. The revenue from the gift certificates should be recognized (Answer : In the period the certificates are redeemed or in the period they expire if they are allowed to lapse.) Q2-An entity sells a durable good to a customer on January 1, Year 1, and the customer is automatically given a 1-year warranty. The customer also buys an extended warranty package, extending the coverage for an additional 2 years to the end of Year 3. At the time of the original sale, the company expects warranty costs to be incurred evenly over the life of the warranty contracts. The customer has only one warranty claim during the 3-year period, and the claim occurs during Year 2. The company will recognize income from the sale of the extended warranty (Answer : In Year 2 and Year 3.) Why Q1 answer revenue is recognized @ end of period, while in Q2 evenly over 2 years, Im so confsued, please help !!

[@schoov5076]

why was the expense not recorded in September, because that's when the substance of the transaction occurred? Which transaction - the transaction of purchasing material for the cake?

[@bonniemcdaniel4224]

I would not be passing my accounting class if it weren't for your videos! Not only am I passing, I have an "A" so far. Thank you for making videos that are so clearly stated and fun to watch! I learn more from your short videos than in my instructor's PowerPoint presentations. You are amazing!

[@AccountingStuff]

Hey Bonnie, it's great to smashing your accounting classes! Keep up the good work :)

[@soccerqueen4life2]

So happy I found this channel! Your videos are definitely going to help me get down the basics as I am currently taking my first Accounting course at University!

[@AccountingStuff]

I hope so - Good luck with your course!

[@1andycandy639]

I wish you were around when I was in school 5 years ago. Your ability to break down the concepts behind why accounting works the way it does is so exciting and fun to watch. I can't get enough! Thanks.

[@AccountingStuff]

No worries, I'm happy to help!

[@blackjack4089]

You are an answered prayer to accounting students like me. Thank you so much ❤

[@AccountingStuff]

You're welcome, I'm happy to help!

[@Medo341q]

bro i have a term exam i understand the concept of basic acccounting because you are presice and your vidieos are informative and intersing at the same time

[@AccountingStuff]

Good luck in your exam!!

[@NforJoan]

A saloon uses the Cash basis to prepare it's financial records, but now consider switching to the accural accounting the salon want to make a transition of instead using the accural accounting. • how will the change positively impact the salon's reports •how will the change negatively impact the the salon's reports •will you recommend the transition of the cash accounting to accural accounting. Please explain why!!

[@pigeonwing9172]

Hi James, if you go to 4:05 in the video you can see it's blank in AB in September for expenses. What if you continually buy loads and loads of supply in a month only to have not seen your continually increasing expenses till the next month or the month after that because the product has not yet been sold? Then, what if your product does not get sold out because the consumer reneges on the deal. I see this is a disadvantage of AB, but how do you deal with this if you use AB? (accruals basis) Also, can you confirm that this is a disadvantage of AB, that if consumers renege on deals, businesses are screwed due to no logging of expenses?

[@pigeonwing9172]

Nevermind, I see that revenue is also, on the flipside in generation, only ecognised as transactions occur therefore you won;y buy that much till you actually have laready made sells

[@AccountingStuff]

You've spotted a major risk in the balance sheet. Anything that is recognised as an 'Asset' is a debit which needs to be justified. If an Asset isn't expected to bring any future economic benefit then the debit should be transferred to the income statement i.e. written off as an expense. In reality business's make provisions against inventory that could potentially be obsolete and eventually write them off

[@minticecream4963]

@@AccountingStuff Thanks for this video. I'm just also wondering what happens under the accruals basis if you have stock you buy and expect to hold and sell in the medium to long term. Is there a particular way you can record this so that you can claim the expense in the immediate term rather than months and years ahead?

[@Patronesofly]

How would you remember to record the expense though assume you have $500 of inventory in the accrual method that you purchased all on 9/4 and sold 50% of the cakes at 9/10 then how would you remember exactly what was purchased 6 days ago? would you have to recount inventory basically periodically and let just say you do it once a year do you just calculate what inventory you have on 1/1/2024 and last day of dec?

[@paulhickey9003]

informative presentations. Only one criticism. Please say recognise - pronounced Rec-og-nise. It isn’t rec-o-nise. Thx.

[@RockUmagic]

What if you use the accrual method and you buy shipping supplies for example. Let’s say you buy 1000 boxes for $300 or $.30/each. Would you be allowed to record the expense as $300 when you bought the boxes? Or would you have to record the expense as $.30 each time you use a box to ship a sale?

[@cindylinan1963]

Hi! I was wondering if you could help me with an accounting question. The business I am working for take about 6 months to get a client to sign a contract, in the meantime we have developers working on their ideal platform to get them to sign up, but we don't get paid until they love it. Once they love it, we have a sandbox working platform that we already spent all the time working on and we get paid (lets say $100,000) up front for the subscription for the following year. I am working with quickbooks but how do you suggest I record all the time worked prior to the payment and signed contract? Thank you

[@AndyBeales]

So Accrual revenue for a me, tour operator, can’t get head around it. Because client pays at least 3 months before trip, maybe 6-9 months, but due to bonding (like escrow) money received after the service. How do I get my head around this? So it’s prepaid, service received in middle, and I receive money after service.

[@irinaandjoshuajavaheri9626]

Can you clarify what you mean when you say that the accrual basis of accounting doesn't track cash flow and the direct/indirect method?

[@AccountingStuff]

Hey Irina & Joshua, yes I will make a couple of videos explaining the direct & indirect method. The Accruals Basis of Accounting doesn't track cash flow because revenue / expenses are recorded when they are earned / incurred. So the income statement doesn't reflect a business's cash flow

[@AccountingStuff]

Hey Irina, I've just uploaded a video on the Direct Method... kzbin.info/www/bejne/jqqQqnetZcymncU There will be another one up soon covering the Indirect Method 👍

[@deniseh1205]

I follow what you are saying but if I buy a bunch of flour in Sept, use only some in Oct, get paid in Nov., and using the matching principle, I would bill for the cake in Oct, thus putting the income in Oct - fine. I'm confused on how to record the total flour in Sept and only the partial use of some in Oct. Thank you in advance!

[@nitinmohane961]

That 10 then means will become cost of sales, correct? But what if we booked purchase as an expense and then revenue like normal business operation.. so meaning (opening stock + purchases - sales) .. is that wrong too . Why can't we book purchases directly as expense instead of booking cost of sales please?

[@titoarce6983]

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[@waelmasoud1934]

Bro, thanks for your efforts, I would to tell you that i following you from dubai, and i like you production, but i want from you if you can translate to arabic so i can understand eacy transactions you need explain for us. Thanks bro, its great

[@kingatowning]

That clapboard not being flush is IRKING ME

[@krystalevans9285]

Thank you so much for your videos! I am in my first year of an accounting degree and I would not have made it through the basics without your channel

[@TravelwithTasha393]

I am so happy that I discovered your channel. I was having such a difficult time in accounting and this is really helping

[@AccountingStuff]

Hey Natasha, sorry to hear that you've been having trouble it. I'm glad that the videos are helping. All the best with your studies!

[@melissah170]

Thank you, subscribed for more accounting stuff!

[@KeepingUpWithKesh23]

Make more videos on accrual accounting please and with examples on how to work it out

[@shapebyshana324]

Professor James, Thank you again haha. I literally watch your videos before i review my lecture material. Helps me understand 100x faster.

[@AccountingStuff]

Great to hear it's making sense! All the best in your studies :)

[@nadirbaig156]

How make the trial balance income statement and balance sheet in construction company.

[@lylan8737]

God bless you whoever you are and wherever you are. Your explanation is magic i never got this from my professors or books. You made is simple. You are excellent

[@dreamdealer8702]

Hey I’m a used Car Dealer that does buy Here Pay Here. We have been doing accrual method. My current accountant is telling me I can’t do the cash method does that sound right ?

[@amaljeeson3786]

Thanks... Please make videos on trading, profit and loss account and balance sheet

[@AccountingStuff]

Hey Amal, thanks for the suggestions!

[@moondust5967]

You are really genius Master. Especially your words and structuring of ideas are very encouraging for weak students of accounting like me. I very eager to follow those videos to come which will hopefully cover practice sessions. Thank you again

[@AccountingStuff]

Thanks Sunny! It's great to hear that you're finding the content helpful. I plan to release many more soon

[@ibrahimmohammad760]

Easy and Simple...!!! Thanks a ton...!!!

[@ronduldulao2472]

is cash and accrual the same as cost and matching principle?

[@ilkinmusayev2906]

Great staff, im just on my way to learn ACCA Financial Accounting and found ur channel here hope ur videos will help me

[@AccountingStuff]

I hope so too! Good luck with your studies

[@jinjin16]

Really helpful. Thanks. Keep it up.

[@declanfeenan]

I work in a small charity transitioning from cash to accrual. I have no accountancy background (working with operational data most of the time) so this was a really useful overview to skill me up for meetings. Thanks!

[@AccountingStuff]

Best of luck with the transition!

[@mariehauschildt6409]

Thank you so much for your videos! You would not believe the anguish I have endured trying to get through my accounting class! Your videos have been a godsend. And hopefully, help me pass my final this next week! Many teachers (including the boring man I watch videos from) could really learn how to teach from your style!

[@AccountingStuff]

Hey Marie, best of luck in your final exam!!! Hope it goes well :)

[@hasting06]

Your videos are so helpful! This is my first time taking an accounting class and you're helping so much!

[@AccountingStuff]

Cheers Jennifer! Hope your studies are going well :)

[@abhisheksoni5582]

Make Cash flow accounting vidoe

[@scottfennell6568]

I just watched five videos on this topic for school and this was the most clear example.

[@AccountingStuff]

Thanks Scott, hope it's making sense :)

[@ArdoBlueMoon]

Great video, however, in your example aren't the expenses for the ingredients accrued when they're paid for in September rather than when they're used in October?

[@madisvlogs3992]

If you pay for a year of insurance in one month you would only use 1/12 of that insurance

[@kevv.1912]

What if the person is unable to pay you on the date?

[@throopasahdew2477]

Great explanation !! Thank you!!!

[@imjayanthkumar]

What if account receivables are not received?

[@markrowland7617]

Definitely would like to see practice problems worked into the videos. The videos are beneficial even without the practice problems, but they'd be even better with them! Thanks and keep up the great work!

[@AccountingStuff]

Thanks for the feedback Mark, I'll bear that in mind for future videos!

[@cheriemoritz7176]

Hi James. I found your videos two days ago and have been binge watching ever since. I'm a new bookkeeper and am learning so much from you. I have a question about my client who owns a restaurant. She wants to use the accrual basis for her books, she's an S Corp, and her CPA files income tax on cash basis. My question is this: at the end of a month if she buys a big order of food ingredients, how can I possibly know how much of that food is used for meals sold that month vs. meals sold in the first week of the next month? Do people really do that. She buys so much food and beverage and if it's done late enough in the month you can bet that some of it gets used in the next period. How do people do that? Thank you.

[@hikMAt.wali2]

your videos and al your lectures really help me while having deep problems in my accounting... thanks a million for your hard working ..

[@msjadhav5192]

Great video. I have 2 questions: 1. If you buy ingredients for cake in September, that is expense too, and it phisicly happend, so why in october? Or there are adjusting entry? But if it's biig manufacturing company, you don't always use all ingredients you bought, for product you made and sell? 2. So accrual method it's when expenses incurred. But we, accountants, can only know by invoice, so basically date in invoice????. In big companies you don't even know what they order, who receives what, and what do they do with it, and you don't really care, because you only deal with numbers, not with row materials etc. Thank you, but little confused

[@castaway8466]

Yes please do the practice questions!

[@jacquelineruiz7130]

yes i would like for you to show more in detail

[@rebeccaziller6623]

Still a delightful video in 2022..

[@airplaneshadow3630]

I prefer to be Finance from whom I will get a change ensure please, I've been less 7 years until I get other wise, imposed to get Interviews, 9 times dismissed, until no have money again, and I feel is just about deadline or just thin out xP

[@TheWiscoKid]

great videos, thanks a bunch

[@oshaneb3176]

Currently reading publication 535 and this was really difficult to grasp but your video really helped. Thank you 👏🏽

[@mli8455]

Great video! Love it. My question is that since the accrual earning is recorded as it incurred, theoretically a business could like to assign a contract say any amount of income, and falsely report as their earning of that period of time; and then cancel it after the report. So essentially, a non-existing income has been reported. Is there any way able to identify this?

[@rosemariecharan2018]

I love that you make account so much fun♥️

[@AccountingStuff]

No worries Rosemarie, I'm happy you are enjoying it!

[@grumpus1403]

We purchase material at one time for multiple jobs. It would be too time consuming to do otherwise - how would you recommend we track profit?

[@markoberhaus1414]

So, have you thought of creating videos about accounting for non-profits?

[@AccountingStuff]

Not yet, but thanks for your request!

[@Medo341q]

please complete shere video we need you

[@fardeenshamsab4254]

Conceptual framework please 🇦🇫🇦🇫🇦🇫

[@AccountingStuff]

Cheers for your suggestion!

[@roxy44]

Wooow! I am beyond amazed as to how well you made this presentation and how easy to understand this video was. I am an accountant but, I used to tutor accounting for the college I attended to for 3 1/2 years and very few people can understand and explain how accounting really works. I really enjoyed your video. Great job! 👍👍

[@emmanuelramos5158]

Great video ! Thanks a lot :)

[@jingqingrongXie]

Thank you!!!!!!!!!!!!!!!!!!! SUPER helpful!!

[@karamokeita1318]

These video's are very useul James, keep them coming

[@AccountingStuff]

Thanks, that's great to hear!

[@robhines3686]

Yes examples would be very useful

[@aniaharmstead2609]

Can you make some videos where the example is a delivery driver my Dad recently started his own business and I’m trying to learn accounting but most of the videos a to complex I just want to know the basic. Please help As Soon As Possible

[@AccountingStuff]

Thanks for your request!

[@aniaharmstead2609]

Thank you I have been trying to get all of this accounting down so I will be able to help. I do better learning is person. So it’s been a struggle but I’m hanging in there

[@poonmagarrahul]

Your videos really helped me a lot . Thanks for sharing such useful videos .

[@elinanakaona8240]

That would be so helpful indeed

[@tiaanlorenzen7778]

Hi when you said you make assumptions with accruel accounting what did you mean

[@mahfuzahmed971]

this video slapped bigman

[@jehatr7508]

Great stuff. Make more please

[@frankgarcia3486]

You are an accounting god!!! Is there any online classes with you?

[@matthewduckett5007]

Yes please that would be great

[@Nelson-oy4rk]

why was the expense recorded in October under the accruals basis meanwhile it incurred in September??

[@AccountingStuff]

Hey Nelson, it's important to distinguish between 'a cost being incurred' and 'cash being paid out'. Costs are incurred when the work is done and should be matched with the revenue earned

[@Nelson-oy4rk]

I see.. thanks very much!

[@m.bilalmajid]

Thank you so much!!!

[@mehnoorbhat1499]

What is the difference between revenue recognition and accrual concept

[@tomlindsay7861]

good video, cheers bro

[@ladev91]

Ok, I have a question. So, say you have a business that makes hot sauce. You buy 100 dollars worth of ingredients in March and use it to make a 200 bottles of hot sauce. You sell 10 bottles in March, 30 bottles in April, 20 bottles in May, and so on. Would you have to spread out the 100 dollar cost of ingredients by the number of hot sauce bottles you sold each month in the future? That seems like alot of work. Would the 100 dollars initially be recorded as a prepaid expenses and then be expenses based on the number of bottles sold?

[@AccountingStuff]

It sounds like you're describing Inventory. In which case the cost of the ingredients should be matched with the revenue as it's earned

[@ladev91]

@@AccountingStuff I see. So you record the initial ingredients as inventory and then just expense them as cost of goods sold for every cake you sell. Thank you.

[@AccountingStuff]

@@ladev91 Yep, I've made a video explaining how it works → kzbin.info/www/bejne/hXOZg3ewptuBmM0

[@Alfoncos]

I don't completely get it. If I buy raw materials in September, process them in October, deliver the product in November and get paid in December. In accrual accounting my expenses incurred when I processed the materials (because they were consumed) not when I physically handed the product to the customer a month later?

[@AccountingStuff]

With the Accrual Method you would match your costs with the revenue as it's earned. Since you delivered the product in November, you'd recognise it all in your income statement then

[@Alfoncos]

​@@AccountingStuff Can I earn revenue when I complete the product? I get it that since I finished something my property increased so I earned the revenue for myself. Is it necessary to hand it to the customer?

[@AccountingStuff]

@@Alfoncos You can't recognise the revenue unless you've earned it. That could be by selling a product to the customer or providing them with a service

[@anaveiga857]

I would really appreciate longer videos with practical exercises.

[@AccountingStuff]

Thanks for your request!

[@polytheneprentiss1534]

Damn, he is one sexy accountant! I could learn a lot from him ;)

[@isambouhiaelhaouzi301]

You're absolutely the best! Thank you man!💪💪💪

[@sapsalingpusacattalkmaykwe1556]

Ty

[@claudiclauds]

Yes please make the long practice problem videos.

[@AccountingStuff]

Hey Claudia, thanks for your suggestion. I'll keep that in mind!

[@WendyEsparza-cy7in]

Me! I would love practice videos 🙋‍♀

[@AccountingStuff]

I've been posting a bunch of practice videos as shorts. If you'd like to see some long form ones too then please let me know. Here's one on Accrual Accounting: kzbin.infoLJpqKXTcHwc

[@زهراءحسن-ر8و]

It will be really useful to solving more problems

[@AccountingStuff]

Glad to hear it!

[@cuzmangraffiti5809]

Aren’t we supposed to credit when revenue increases?

[@AccountingStuff]

Revenue is a 'normal credit account' so credits increase it

[@shivarajput6549]

I need it.....

[@AccountingZerotoHero]

This is great!

[@sinhuasho]

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