Accrual Accounting Reminders

[Business Affairs Office News]

Good afternoon,

The Business Affairs Office Financial Services Department would like to remind University of Oregon personnel of important accrual accounting procedures regarding prepaid expense, accounts receivable, and unearned/undistributed revenue. _____________________________________________________________________________________
Prepaid Expense

According to Generally Accepted Accounting Principles (GAAP), accrual accounting requires expenditures to be charged to the fiscal year and period in which goods are received or services are performed. The availability of budget or cash is irrelevant to which period the expense is recorded in.

Expenses for future periods or fiscal years should be coded to the appropriate prepaid expense account code (see below). To remove the prepaid and recognize the expense, post a reversing journal voucher with a transaction date in the fiscal year and period that the goods or services are to be provided. This journal voucher may be processed ahead of time if the future period is open.

To move posted expenses to prepaid expense:

Debit                       Department Index                   Prepaid Expense Account Code
Credit                      Department Index                   Expense Account Code

To reverse the prepaid and recognize the expense in a future period or fiscal year:

Debit                       Department Index                   Expense Account Code
Credit                      Department Index                   Prepaid Expense Account Code

Common prepaid expense account codes:

Account Code

Title

A5019

Prepaid Services & Supplies

A5020

Prepaid Travel

A5021

Prepaid Subscriptions/Memberships

A5022

Prepaid Capital Assets

A5023

Prepaid Software Expenditures

A5030

Prepaid Misc Expense


It is important that prepaid expense beginning balances are reviewed and adjusted as appropriate prior to year-end. To review prepaid expense accounts or any other general ledger accounts, use FGITBAL/FGIGLAC or FWIGLDD. Some prepaid expenses, such as airfare for travel, may be initiated outside of your department.
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Accounts Receivable

Departments that sell products or provide services should post revenue on an accrual basis. According to GAAP, accrual accounting requires revenue be recognized when the product is delivered or the services are provided, not when the payment is received.  Departments should accrue amounts owed to them by customers external to UO.

To record revenue and a receivable when the goods or services are provided:

Debit                       Department Index                   A3103 - Misc A/R
Credit                      Department Index                   Revenue Account Code

To reduce the receivable deposit the payment utilizing TWADEPO:

Debit (CASH, CHEK, CARD, or BANK depending how revenue was received)
Credit (MISC)            Department Index                   A3103 - Misc A/R

It is important that receivable amounts are reviewed for accuracy and adjusted as appropriate. To review account A3103 or any other general ledger accounts, use FGITBAL/FGIGLAC or FWIGLDD. Additional requirements at year-end include analysis of accounts for uncollectable amounts and preparation of a detailed accounts receivable aging list reconciled to the general ledger.
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Unearned/Undistributed Revenue

Unearned Revenue - According to GAAP, accrual accounting requires revenue be recognized in the fiscal year and period in which the goods or the service are provided. Unearned revenue is a liability recorded for payments received for goods or services which have not yet been provided. A journal voucher needs to be processed in the future period or year that the goods or services are to be provided.

To deposit payment through TWADEPO when it is received:

Debit (CASH, CHEK, CARD, or BANK depending how payment was received)
Credit (MISC)            Department Index                   Unearned Revenue Account Code

To recognize the revenue in a future period or fiscal year:

Debit                       Department Index                   Unearned Revenue Account Code
Credit                      Department Index                   Revenue Account Code

Undistributed Revenue - Revenue earned for goods or services that is accumulated in the liability account code B5801 until distributed as revenue.

Common unearned/undistributed revenue account codes:

Account Code

Account Code Title

Unearned Revenue



B5120

Prepaid Tuition & Fees

B5802

Unearned Revenue

B5817

Unredeemed Gift Cards/Certificates

Undistributed Revenue



B5801

Undistributed Revenue


It is important that unearned/undistributed revenue balances are reviewed and adjusted as appropriate. To review unearned/undistributed revenue accounts or any other general ledger accounts, use FGITBAL/FGIGLAC or FWIGLDD.
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If you have any questions, please contact us or visit our Financial Procedures webpage at http://ba.uoregon.edu/content/financial-procedures.


Thank you,

BAO Financial Services Department

Phil Davis, 6-3524, pdavis at uoregon.edu
Jill Ritz, 6-1256, jritz at uoregon.edu<mailto:jritz at uoregon.edu>
Robbin Howard, 6-1115, rchoward at uoregon.edu<mailto:rchoward at uoregon.edu>


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