00:01
In this example, we're going to be talking about gap rules and what may have gone wrong in a few situations.
00:07
Delta company prepared its first set of financial statements for three years.
00:13
The issue here is, why weren't they creating their financial statements each year? this is a huge concern.
00:23
The rest of these have to do with specific accounts.
00:26
They're less general.
00:28
Warren consulting purchased $9 ,800 of supplies.
00:33
On september 30th.
00:35
And they debited supplies expense.
00:40
The issue here is they should never have debited supplies expense.
00:44
We debit the expense when we use the supplies.
00:48
The journal entry that they should have made was a debit to supplies for this amount and a credit to cash.
00:59
Again, we would not record supplies expense until we use the supplies.
01:03
On may 3rd, mindy carwash collected $3 ,000 in advance from a limousine company to begin operating.
01:15
They credited a revenue account...