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An accelerated transaction is a new type of transaction, a cash based transaction, instead of the typical transactions used throughout the course. Typical transactions are accrual based ones, already defined earlier in the course.

A cash based transaction is recorded when cash changes hands. Recording such a transaction requires fewer journal entries for closing an accounting period and creating financial statements.

The term "acceleration" means that instead of recording transactions individualy, these are added together for the whole period and registered on 31st December.

All accelerated transactions as listed at the end of Y1, Y2, Y3, Y4 are recorded as cash based transactions. There are no creditors, nor accruals. Every revenue, every expense and every equity transaction is recorded twice: a cash entry and an asset or equity entry.

1st Group of Accelerated Transactions:

Effect of Revenue for Sale of Licenses O100; Effect of Revenue Recurrent Licenses O101.

The effect of this type of transactions on the accounting equation is:

Accounting Equation
1. Effect of Revenue January to December Increase in Bank (+)
Increase in Retained Earnings (+)

The licenses of the software have been dispatched to the customer who has also received the corresponding invoices and has paid them.

The entries for these transactions are as shown in the Accounting System > Group 7 > WorkSheets Y2.

The following entries describe the interrelationship between the financial statements:

There are two entries of in the balance sheet, a debit entry, Cash at Bank, and a credit entry of the same value in the Retained Earnings Account, recognising that the sale has occurred, thus matching revenue to sales.

There is one entry in the Income Statement as we are recording the sale already made and paid.

There is an entry in the Cash Flow Statement, as we are receiving a payment in cash.

There is one entry in the Changes of Equity Statement as earned revenue increases owner's capital.

The effect in the balance sheet is shown below:

Balance Sheet
Balance Sheet
Assets = Liabilities + Equity + Retained Earnings
Date Type of Event Operations Bank Debtors and Prepayments Other Current Assets Fixed Assets = Current Liabilities Long Term Liabilities Equity Retained Earnings
(Stock) Creditors Accruals Long Term Loan
Beginning Balance b/f 391,560 0
31.12.Y2 Effect of Revenue January to December O100* 1,770,000 1,770,000
Ending Balance c/f 2,161,560 1,770,000

*O100 represents the addition of similar revenue transactions from January Y2 through December Y2. The amount of 1,770,000 represents the cummulative sales of licenses for 12 months, from January Y2 through December Y2, 59 in total at 30,000 unit price. Refer to Cash Flow Y2 in the Accounting System.

The following describes the interrelationship between entries in the financial statements:

Interrelationship of Entries in the Four Financial Statements
Balance Sheet Income Statement Statement of Cash Flows Statement of Changes in Equity
Date Type of Event Operations Bank Retained Earnings Net Income Inflows (+) of Cash Plus Net Income
31.12.Y2 Effect of Revenue January to December O100 1,770,000 1,770,000 1,770,000 n/a 1,770,000

2nd Group of Accelerated Transactions

Effect of Expense:

Software Upgrade O103; Web Site Development O104; Website Maintenance O105; On Going Technical Support O106; PR & Marketing O107; Salaries O110; Consultancy and Accounting O111; Office Cost O112; General Cost O113

The effect of this type of transactions on the accounting equation is:

Accounting Equation
1. Effect of Expense January to December Decrease in Bank (-)
Decrease in Retained Earnings (-)

The entries for these transactions in the four financial statements are as shown in the Accounting System > Group 7 > WorkSheets Y2.

Balance Sheet
Balance Sheet
Assets = Liabilities + Equity + Retained Earnings
Date Type of Event Operations Bank Debtors and Prepayments Other Current Assets Fixed Assets = Current Liabilities Long Term Liabilities Equity Retained Earnings
(Stock) Creditors Accruals Long Term Loan
Beginning Balance b/f 1,062,560 1,910,000
31.12.Y2 Effect of Software Upgrade O103* -120,000 -120,000
Ending Balance c/f 942,560 1,790,000

*O103 represents the addition of similar expense transactions from January Y2 through December Y2. The amount of 120,000 represents the cumulative value of expenses for website development for 12 months, from January Y2 through December Y2, 10,000 each month. Refer to Cash Flow Y2 in the Accounting System.

The entries to the Bank Account and to the Retained Earnings Account are as shown in the Exhibit below.

T Account
Bank Account
Debit Credit
Date Operation Details Amount Date Operation Details Amount
31.12.Y2 O103 Retained Earnings 120,000
- - - - - - - -
Retained Earnings Account
Debit Credit
Date Operation Details Amount  Date Operation Details Amount
31.12.Y2 O103 Bank 120,000
- - - - - - - -

Please refer also to the 3rd Typical Transaction.

3rd Group of Accelerated Transactions

Effect of Expense:

Purchase of Licenses for Resale O102; Purchase Marketing Materials O108; Purchase Promotion Materials O109. 

The effect of this type of transactions on the accounting equation is:

Accounting Equation
1. Effect of Purchase January to December Decrease in Bank (-)
Increase in Other Current Assets (+)

The entries for these transactions in the four financial statements are as shown in the Accounting System > Group 7 > WorkSheets Y2.

The company is purchasing prootional materials, the supplier, after delivering the goods, has submitted an invoice, which we have recognised (accepted), recorded and paid.

The following entries describe the interrelationship between the financial statements:

Its effect in the balance sheet is shown in the Exhibit below. There are two entries in the balance sheet, a credit entry, Cash at Bank and a debit entry, Other Current Assets (Inventory).

Its effect in the balance sheet is shown in the Exhibit below.

Balance Sheet
Balance Sheet
Assets = Liabilities + Equity + Retained Earnings
Date Type of Event Operations Bank Debtors and Prepayments Other Current Assets Fixed Assets = Current Liabilities Long Term Liabilities Equity Retained Earnings
(Stock) Creditors Accruals Long Term Loan
Beginning Balance b/f 2,301,560 0
31.12.Y2 Purchase of Licenses for Resale O102* -1,239,000 1,239,000
Ending Balance c/f 1,062,560 1,239,000

*O102 represents the addition of similar expense transactions from January Y2 through December Y2. The amount of 1,239,000 represents the cumulative value of expenses to purchase licenses for resale for 12 months, from January Y2 through December Y2, 59 in total at 21,000 each. Refer to Cash Flow Y2 in the Accounting System.

The effect on other three statements is shown below in the Exhibit below.

There is no entry in the Income Statement because the items bought have not been used as yet or in different words the goods have not been expensed. The goods remain as Current Assets (Inventory) until they are used. When goods are used or expensed then we should recognise it as an expense and this expense to be entered as an adjustment in the Income Statement.

There is one entry in the Cash Flow Statement, equal to the cash paid to the supplier.

There is no entry in the Changes of Equity Statement as the goods have not yet been used. The use of the goods will be recognised, or expensed, as an adjustment at the end of the accounting period.

Interrelationship of Entries in the Four Financial Statements
Balance Sheet Income Statement Statement of Cash Flows Statement of Changes in Equity
Date Type of Event Operations Bank Stock
31.12.Y2 Purchase of Licenses for Resale O102 -1,239,000 1,239,000

Please refer to both, 10th and 11th Typical Transactions.



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