In accounting, the term relevance means it will make a difference to a decision maker. For example, in the decision to replace equipment that has been used for the past six years, the original cost of the equipment does not have relevance. In other words, the original cost is irrelevant or is not relevant in the decision to replace the equipment. What will have relevance are the future amounts, such as the cost of the new equipment, and the savings that will occur when the old equipment is replaced. Here's another expression of relevance: Costs that will differ among alternatives. Costs that will not differ among alternatives do not have relevance. In order to have relevance, accounting information must be timely. Financial statements issued three weeks after the accounting period ends will have more relevance than financial statements issued several months after the period ends. Having timeliness and relevance may mean sacrificing some precision or reliability. Read more about relevance in paragraphs 46-57 of the Statement of Financial Accounting Concepts No. 2, Qualitative Characteristics of Accounting Information , issued by the Financial Accounting Standards Board. You may read it at no cost at Studies show that exam questions are a great way to learn and retain important information. Gain access to our 1, 700 accounting exam questions (and answers) when you upgrade to PRO.

As a financial accountant, you may choose to work in public accounting (doing jobs for multiple business clients) or private accounting (performing accounting work only for your employer). You can also choose to specialize in governmental accounting, not-for-profit accounting, forensic accounting (which relates to legal proceedings or testimony), or other specific fields. No matter what your professional goals are, certain coursework and certifications — as well as a handful of crucial skills and traits — can help ensure your success. Undergraduate courses: For a bachelor’s degree in accounting, you probably need about 120 credit hours total. In addition to general education requirements, you take core business classes such as Financial Accounting, Managerial Accounting, Business Law, Principles of Management, Economics, Finance, and Marketing. You also take more specific accounting courses, such as Intermediate Accounting, Federal Income Tax, Accounting Information Systems, and Auditing. Graduate courses: To earn a Masters in Business Administration (MBA) degree, you probably need to take 30 credit hours of graduate-level courses. If you plan to sit for the Certified Public Accountant (CPA) exam, be sure to map your MBA courses to meet the requirements to sit for the exam. Check out Steps to Become a CPA at the American Institute of CPAs for guidance. CPA exam: The CPA is the professional license for accountants. To become a CPA, you must first complete a certain number of accounting and business-related courses in college. You then must take and pass the Uniform Certified Public Accountant exam, which is written and scored by the American Institute of Certified Public Accountants (AICPA). Other licenses: In addition to pursuing your CPA license, you may decide to add more initials after your name by pursuing a designation such as Forensic CPA, Certified Fraud Examiner (CFE), or Certified Management Accountant (CMA). Essential skills: Successful financial accountants bring great communication skills (both oral and written) to the job, as well as decent computer skills. Personality traits: The best financial accountants have a desire to work independently, even when they’re part of a team; a love for research, detail, and logic; and the willingness to listen and learn about a variety of industries.

In May, the Financial Accounting Foundation (FAF), which oversees the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB), released its 2013 Annual Report (the Report), which provides insight into how the U.S. accounting standard-setting process is expected to evolve in the months and years to come. The Report provides comments from the Board Chairmen of the FASB and GASB that address what each respective organization would like to accomplish in 2014 and processes they would like to implement in order to make accounting standard setting in the United States more productive and efficient. Here are a few of the items included in the Report: FASB The FASB intends to successfully conclude all of the remaining convergence projects it is currently working on bilaterally with the International Accounting Standards Board (IASB). This includes the revenue recognition project, on which both sides tend to agree; as well as projects addressing financial instruments, insurance contracts, and leases, on which the organizations are expected to reach differing conclusions. These are the remaining projects the FASB currently has planned to address bilaterally with the IASB. Going forward, the FASB will participate in the development of International Financial Reporting Standards through its representation on the IASB’s Accounting Standards Advisory Forum. To assist the FASB in its decision-making process, it plans to group potential projects into three categories: Foundational projects which have an overarching and long-term impact on Generally Accepted Accounting Principles (GAAP)—such as the FASB’s conceptual framework and disclosure framework projects. Projects that promote transparency which consider recognition, measurement, and presentation issues. Projects aimed at reducing the cost and complexity of financial reporting, while improving its relevance to financial statement users. The FASB is planning to simplify its Codification by issuing “plain-English” materials and creating transition resource groups that are tasked with the education, interpretation, and amendments related to the issuance of major new standards. GASB The GASB is planning to undertake a project to reexamine its financial reporting model. The project will focus on identifying ways in which the reporting model’s effectiveness can be enhanced and the complexity of financial reporting can be reduced. The GASB will be issuing “plain-English” videos designed to simplify the implementation process of newly issued standards. The GASB will also be considering ways to improve the timeliness of financial reporting. The Chairmen for the FASB and GASB have also indicated that they intend to work more collaboratively with each other on projects with similar underlying economics. To aid the GASB and FASB in achieving their respective goals, the FAF established a Post-Implementation Review process that is designed to determine whether the standards issued by the GASB and FASB accomplish the stated purpose and provide useful information to financial statement users. WE ARE REQUIRED BY IRS CIRCULAR 230 TO INFORM YOU THAT THE FOLLOWING DISCUSSION WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, NOR RELIED UPON, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW. THE ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THE DISCUSSION. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

DELL PREFERRED ACCOUNT (DPA): Offered to U.S. residents by WebBank, who determines qualifications for and terms of credit. Taxes, shipping, and other charges are extra and vary. Payments equal 3% of your balance or $20, whichever is greater. Minimum Interest Charge is $2.00. Rates range from 19.99% - 29.99% variable APR, as of 1/31/2016, depending on creditworthiness. Dell and the Dell logo are trademarks of Dell Inc. 6 MONTHS SPECIAL FINANCING is a no interest if paid in full by October, 2016 financing promotion available at time of purchase from 2/25/2016 through 3/30/2016 . Minimum monthly payments are required during the promotional period. Interest will be charged to your account from the purchase date if the purchase balance is not paid in full by your Payment due date in October, 2016, or if you make a late payment . If not paid by end of promotional period, account balance and new purchases will be subject to the Standard APR rates, which range from 19.99% - 29.99% variable APR, as of 1/31/2016, depending on creditworthiness. Offers subject to credit approval and may be changed without notice. Eligible equipment includes: New PCs $599 or more New select Canon camera lenses (Dell order codes: A7632538, A1181320, A0166173, A7227290, A3283667, A6046660, A7227289, A0534458, A0411224, A7227236, A7227235, A0944504, A0405637, A0670090, A7227379, A0533294, A6140241, A0405621, A0400817, A5165546, A8632878, A8632897, A8632898, A8632899, A8632900 ) Refurbished and/or used purchases do not qualify for promotions. Interest will be charged to your account from the purchase date if the purchase balance is not paid in full by your Payment due date in October, 2016. 12 MONTHS SPECIAL FINANCING is a no interest if paid in full by April, 2017 financing promotion available at time of purchase from 2/25/2016 through 3/30/2016 . Minimum monthly payments are required during the promotional period. Interest will be charged to your account from the purchase date if the purchase balance is not paid in full by your Payment due date in April, 2017, or if you make a late payment . If not paid by end of promotional period, account balance and new purchases will be subject to the Standard APR rates, which range from 19.99% - 29.99% variable APR, as of 1/31/2016, depending on creditworthiness. Offers subject to credit approval and may be changed without notice. Eligible equipment includes: New Alienware PC and console purchases New Smart LED TVs New PCs $1, 099 or more New MakerBot 3D printer (Dell order codes: A7516721, A7629818, A7598495, A7617635) New select Canon cameras ( Dell order codes: A8018915, A8063037, A7225506, A6846565, A6441146, A7225513, A7225508, A7225509, A7225507, A7069140, A7069141, A7069139, A6953369, A7624607, A7754290, A7754261, A7561061, A8050264, A8358538, A8358539, A8358537, A8358541, A8358540, A8383393, A8383394, A8358518, A8337159, A8194851, A8194666, A8194657, A8337163, A8358536, A7561064, A8194853, A8194833, A8194832, A8194830, A8588302, A8562156, A7510522, A8581582, A8581581, A8581588, A8581578, A8581580, A8632895, A8632867, A8632872, A8632874, A8632875, A8632876, A8632896 ) Refurbished and/or used purchases do not qualify for promotions. Interest will be charged to your account from the purchase date if the purchase balance is not paid in full by your Payment due date in April, 2017.

Current Rates Bank Information ICA Disclosure Information FDIC Website THE PRIORITY BANK LIST BELOW WAS MOST RECENTLY CHANGED ON March 17, 2016. Welcome to the LPL Financial ("LPL Financial") Insured Cash Account ("ICA") program. Generally, under the ICA program, your available cash balances (from securities transactions, dividend and interest payments and other activities) in your eligible accounts will automatically be deposited into interest-bearing Federal Deposit Insurance Corporation ("FDIC") insured deposit accounts ("Deposit Accounts") at one or more of the banks or other depository institutions on the Priority Bank List set forth below (each, a "Bank"). For yields for money market mutual funds that LPL Financial continues to offer, please contact your financial advisor. The Deposit Accounts available through the ICA program are eligible for insurance by the Federal Deposit Insurance Corporation ("FDIC") up to $250, 000 in principal and accrued interest per depositor (including individual retirement accounts ("IRAs"), including Roth IRAs, and certain other retirement accounts) in each insurable capacity (e.g., individual, joint, etc.) per insured depository institution. As your agent, LPL Financial will place up to $246, 500 of your available cash for an individual or trust account, and up to $493, 000 for a joint account, in one Bank. As your agent, LPL Financial will open Deposit Accounts at additional Banks so that funds in excess of $246, 500 for individual or trust accounts (or $493, 000 for a joint account) may be swept into those accounts, which are also eligible for deposit insurance. If $246, 500 has been deposited for you (or $493, 000 for your joint account) through the ICA program in each Bank on the Priority Bank List up to $1.5 million, excess funds above $1.5 million of deposit insurance ($3 million for joint accounts) will be invested in the J.P. Morgan Prime Money Market Fund - Service Shares. A prospectus for the J.P. Morgan Prime Money Market Fund - Service Shares is available from LPL Financial upon request. If invested in the J.P. Morgan Prime Money Market Fund - Service Shares, your funds are not eligible for FDIC deposit insurance. The ability of the ICA program to sweep your uninvested cash into Bank deposit accounts depends, however, on the capacity of the Banks to accept new deposits. If one or more of the Banks at which you do not already have deposits decline to accept your uninvested cash, your cash that cannot be fully deposited into the Banks will be automatically invested into the J.P. Morgan Prime Money Market Fund - Service Shares just as it will be when your available cash exceeds the maximum level of available deposit insurance (currently $1.5 million for individual accounts and $3 million for joint accounts). When Bank capacity is restored, under the ICA program, your funds are automatically moved from the J.P. Morgan Prime Money Market Fund, and LPL Financial, as agent, will deposit those funds into deposit accounts with the available Bank(s), subject to the maximum amount of FDIC insurance. The ICA program is available only to individuals, trusts (so long as all beneficiaries of the trust accounts are natural persons), and sole proprietorships. Custodial accounts are eligible for the Program if each beneficiary is an eligible person. LPL Financial may at its discretion deem an eligible person to be an ineligible person if LPL Financial becomes aware that the person is prohibited as a matter of law from holding funds at the Bank. Entities organized or operated to make a profit, such as corporations, partnerships, associations, business trusts, and other organizations (other than sole proprietorships), and discretionary investment advisory retirement accounts are not eligible for the ICA program. Please consult your financial advisor for additional details concerning eligibility. Each Deposit Account constitutes a direct obligation of the Bank and is not directly or indirectly an obligation of LPL Financial. You can obtain publicly available financial information concerning each Bank at or by contacting the FDIC Public Information Center by mail at 3501 North Fairfax Drive, Room E-1005, Arlington, VA, 22226 or by phone at

Nano learning breaks instruction into self-contained modules that can last from two to 15 minutes. These small lessons focus on one or two specific learning objectives. Additionally, they’re typically available “on-demand” so students and professionals can learn at their own pace, in their own space, amid their other responsibilities. Many educators and students feel the best way to learn, still, is face-to-face instruction in small group settings, assuming that time is available and the instructor is motivated and inspired. But what if in-person access is not easy, the class setting is not personal, or the instruction is mediocre? A great instructor from a distance who is available for live chats or video conferences might actually be the superior option. Blended Learning: Stimulating Every Learning Style Even with face-to-face instruction, technology now allows us to develop new ways to appeal to different learning styles. At my university, for example, Principles of Financial Accounting is the first required course for business majors. To invigorate student engagement in a course dreaded by many, I adopted a blended learning approach known as a “flipped classroom.” Students are required to watch short lecture videos before the first class meeting each week. In the second meeting, students are broken into four groups of 30, with each sub-group broken down into groups of three. The breakout sections are led by four mentors, who are outstanding senior accounting majors. Students do their “homework” during class time in their breakout groups. Hence, what formerly was homework becomes classwork; what was classwork now becomes homework. Performance Measurement Challenges One of the biggest challenges we face is changing the way we determine whether a student or professional has learned a topic or skill. Learning should be based on demonstration of competency, not seat time or merely memorizing facts and formulas. In one course I teach, students can weight their grade according to their strengths and weaknesses (for example, more weight on projects; less weight on exams; more weight on personal journal, less weight on quizzes; more weight on video mastery, less weight on something else). Who can say that the student who performs poorly on tests, yet is able to clearly explain the materials in their journal entries or during oral presentations, doesn’t understand the material? Grasping concept is more important than the format in which they demonstrate their competency. I believe the main goal of the first financial accounting course should be to help students appreciate the role of accounting in a larger societal context, and to help them become “literate” in business. Literacy includes demonstrating that they can create a cash budget, perform basic Excel spreadsheet tasks, and read financial statements for service, retail and manufacturing entities.

A balance sheet is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by shareholders. The balance sheet adheres to the following formula: Assets = Liabilities + Shareholders' Equity BREAKING DOWN 'Balance Sheet' The balance sheets gets its name from the fact that the two sides of the equation above – assets on the one side and liabilities plus shareholders' equity on the other – must balance out. This is intuitive: a company has to pay for all the things it owns (assets) by either borrowing money (taking on liabilities) or taking it from investors (issuing shareholders' equity). For example, if a company takes out a five-year, $4, 000 loan from a bank, its assets – specifically the cash account – will increase by $4, 000; its liabilities – specifically the long-term debt account – will also increase by $4, 000, balancing the two sides of the equation. If the company takes $8, 000 from investors, its assets will increase by that amount, as will its shareholders' equity. All revenues the company generates in excess of its liabilities will go into the shareholders' equity account, representing the net assets held by the owners. These revenues will be balanced on the assets side, appearing as cash, investments, inventory, or some other asset. Assets, liabilities and shareholders' equity are each comprised of several smaller accounts that break down the specifics of a company's finances. These accounts vary widely by industry, and the same terms can have different implications depending on the nature of the business. Broadly, however, there are a few common components investors are likely to come across. Assets Within the assets segment, accounts are listed from top to bottom in order of their liquidity, that is, the ease with which they can be converted into cash. They are divided into current assets, those which can be converted to cash in one year or less; and non-current or long-term assets, which cannot. Intangible assets: these include non-physical, but still valuable, assets such as intellectual property and goodwill; in general, intangible assets are only listed on the balance sheet if they are acquired, rather than developed in-house; their value may therefore be wildly understated—by not including a globally recognized logo, for example—or just as wildly overstated Liabilities Liabilities are the money that a company owes to outside parties, from bills it has to pay to suppliers to interest on bonds it has issued to creditors to rent, utilities and salaries. Current liabilities are those that are due within one year and are listed in order of their due date. Long-term liabilities are due at any point after one year. Pension fund liability: the money a company is required to pay into its employees' retirement accounts Deferred tax liability: taxes that have been accrued but will not be paid for another year; besides timing, this figure reconciles differences between requirements for financial reporting and the way tax is assessed, such as depreciation calculations Some liabilities are off-balance sheet, meaning that they will not appear on the balance sheet. Operating leases are an example of this kind of liability. Shareholders' equity Shareholders' equity is the money attributable to a business' owners, meaning its shareholders. It is also known as "net assets, " since it is equivalent to the total assets of a company minus its liabilities, that is, the debt it owes to non-shareholders. Retained earnings are the net earnings a company either reinvests in the business or uses to pay off debt; the rest is distributed to shareholders in the form of dividends. Treasury stock is the stock a company has either repurchased or never issued in the first place. It can be sold at a later date to raise cash or reserved to repel a hostile takeover. Some companies issue preferred stock, which will be listed separately from common stock under shareholders' equity. Preferred stock is assigned an arbitrary par value—as is common stock, in some cases—that has no bearing on the market value of the shares (often, par value is just $0.01). The "common stock" and "preferred stock" accounts are calculated by multiplying the par value by the number of shares issued. Additional paid-in capital or capital surplus represents the amount shareholders have invested in excess of the "common stock" or "preferred stock" accounts, which are based on par value rather than market price. Shareholders' equity is not directly related to a company's market capitalization: the latter is based on the current price of a stock, while paid-in capital is the sum of the equity that has been purchased at any price. How To Interpret a Balance Sheet The balance sheet is a snapshot, representing the state of a company's finances at a moment in time. By itself, it cannot give a sense of the trends that are playing out over a longer period. For this reason, the balance sheet should be compared with those of previous periods. It should also be compared with those of other businesses in the same industry, since different industries have unique approaches to financing. A number of ratios can be derived from the balance sheet, helping investors get a sense of how healthy a company is. These include the debt-to-equity ratio and the acid-test ratio, along with many others. The income statement and statement of cash flows also provide valuable context for assessing a company's finances, as do any notes or addenda in an earnings report that might refer back to the balance sheet.

From churches to youth organizations to the local chambers of commerce, nonprofit organizations make our communities more livable places. Unlike for-profit businesses that exist to generate profits for their owners, nonprofit organizations exist to pursue missions that address the needs of society. Nonprofit organizations serve in a variety of sectors, such as religious, education, health, social services, commerce, amateur sports clubs, and the arts. Nonprofits do not have commercial owners and must rely on funds from contributions, membership dues, program revenues, fundraising events, public and private grants, and investment income. Our intent is to present some of the basic concepts that are unique to nonprofit accounting and reporting, including the financial statements required by the Financial Accounting Standards Board (FASB). We will not dwell on the accounting that is similar to that used by for-profit businesses. If you are not familiar with accounting for businesses or you wish to refresh your understanding, you will find free explanations, quizzes, Q&A, and more at . Accountants often refer to businesses as for-profit entities and to nonprofit organizations as not-for-profit entities. We will be using the more common term nonprofit instead of not-for-profit. Again, this is not a comprehensive study of the field of nonprofit accounting. There are many different types of nonprofits, including governmental nonprofits, which we will not address. Note: We developed seven business forms to assist you in preparing the financial statements of a nonprofit organization. You can find additional information at . Differences between Nonprofits and For-Profits The following table highlights some of the key differences between nonprofit organizations and for-profit corporations: Mission and Ownership While businesses are organized to generate profits, nonprofits are organized to address needs in society. As a result, nonprofits will issue a statement of activities instead of the income statement issued by for-profit businesses. Since nonprofits do not have owners, there is no owner's equity or stockholders' equity and there cannot be distributions to owners. Some people mistakenly assume that if an organization is designated as a nonprofit, it cannot legally earn profits. In fact, earning profits (having revenues that exceed expenses) is almost a necessity for a nonprofit if it hopes to withstand such things as: unexpected expenses uneven flows of revenues a decrease in revenues rising costs due to inflation an increase in staffing needs an increase in the need for its services a purchase or replacement of needed equipment other needs since a nonprofit cannot issue shares of stock Tax-Exempt Status Nonprofit organizations may apply to the Internal Revenue Service in order to be exempt from federal income taxes. A second issue is whether a donor's contribution to a nonprofit organization will qualify as a charitable deduction on the donor's income tax return. For example, churches, schools, and Red Cross chapters are some of the nonprofits that will qualify as tax-exempt and their donors' contributions will also qualify as charitable deductions on the donors' income tax returns. However, there are nonprofits that qualify as tax-exempt but their donors' contributions do not qualify as charitable deductions (although they may qualify as business expenses). Examples of these nonprofits include social organizations, chambers of commerce, college fraternities and sororities, amateur sports clubs, employee organizations, and more. You can learn more about the tax-exempt status for a nonprofit, the deductibility of contributions by donors, and the taxability of activities not directly related to a nonprofit's exempt purpose in the Internal Revenue Service Publication 557, Tax-Exempt Status for Your Organization, which is available at no cost on . Even if a nonprofit is exempt from federal income taxes, it is likely that its employees will be subject to employment taxes. Nonprofits may or may not be exempt from sales taxes, real estate taxes, and other taxes depending on which state in the U.S. they are incorporated or operate.

The curriculum comprises 4 required courses and 12 semester units of electives for a total of 24 semester units (360 hours of instruction). Candidates must pay a nonrefundable certificate registration fee. You must take all courses for a letter grade. To receive the certificate, you must maintain an overall minimum 2.5 grade point average, with a grade of C or better in each course. A Certificate With Distinction will be awarded to those who complete the certificate with a GPA of 3.7 or higher. All coursework must be completed within five years of registering for the certificate. Most students take one-and-a-half years to complete the courses. How to Register By registering, you declare your intention to complete the curriculum. To register online for the Certificate Program in Accounting, complete these two steps: Pay the nonrefundable registration fee through your shopping cart. Please allow 3–5 business days for the registration to appear in your student account. Estimated Cost Each course is priced individually, and you pay the course fee at the time of enrollment. The certificate has an estimated cost of $7, 225 (not including course materials or registration fee). Course fees are subject to change. Certificate and Award Request Once you have completed the certificate coursework, notify UC Berkeley Extension that you have completed the curriculum and request your certificate. Send an email to extension-business@berkeley.edu or call (510) 642-4231. After your records have been reviewed, verified and approved, your certificate will be sent to you in the mail. The review of your records is usually completed within six to eight weeks after you request the certificate. Additional Information CPA Licensure Requirements Information about Certified Public Accountant (CPA) and Certified Management Accountant (CMA) licensing and renewal requirements is available at: MBA Programs Some of our courses may fulfill prerequisites for M.B.A. programs. Please note that acceptance of transfer credit is always at the discretion of the accepting institution; contact the schools to which you are applying for information about transfer of credits earned at UC Berkeley Extension. Advisory Board John Finegan Senior Consultant Financial Leadership Group Maricela Frausto Audit Senior Manager KPMG LLP Tom Hoster Financial Consultant Former CFO Susan Klein CPE Director, California Society of CPAs Cal CPA Education Foundation Harry Lorsbach Adjunct Professor, UC Berkeley Extension Internal Auditor, Berkeley National Labs Maria Nondorf Executive Director Center for Financial Reporting and Management Haas School of Business UC Berkeley Suzann Sylvester

Marilyn points out that an income statement will show how profitable Direct Delivery has been during the time interval shown in the statement's heading. This period of time might be a week, a month, three months, five weeks, or a year—Joe can choose whatever time period he deems most useful. The reporting of profitability involves two things: the amount that was earned (revenues) and the expenses necessary to earn the revenues. As you will see next, the term revenues is not the same as receipts, and the term expenses involves more than just writing a check to pay a bill. A. Revenues The main revenues for Direct Delivery are the fees it earns for delivering parcels. Under the (as opposed to the less-preferred ), revenues are recorded when they are earned, not when the company receives the money. Recording revenues when they are earned is the result of one of the basic accounting principles known as the . For example, if Joe delivers 1, 000 parcels in December for $4 per delivery, he has technically earned fees totalling $4, 000 for that month. He sends invoices to his clients for these fees and his terms require that his clients must pay by January 10. Even though his clients won't be paying Direct Delivery until January 10, the accrual basis of accounting requires that the $4, 000 be recorded as December revenues, since that is when the delivery work actually took place. After expenses are matched with these revenues, the income statement for December will show just how profitable the company was in delivering parcels in December. When Joe receives the $4, 000 worth of payment checks from his customers on January 10, he will make an accounting entry to show the money was received. This $4, 000 of receipts will not be considered to be January revenues, since the revenues were already reported as revenues in December when they were earned. This $4, 000 of receipts will be recorded in January as a reduction in . (In December Joe had made an entry to Accounts Receivable and to .) B. Expenses Now Marilyn turns to the second part of the income statement—expenses. The December income statement should show expenses incurred during December regardless of when the company actually paid for the expenses. For example, if Joe hires someone to help him with December deliveries and Joe agrees to pay him $500 on January 3, that $500 expense needs to be shown on the December income statement. The actual date that the $500 is paid out doesn't matter. What matters is when the work was done—when the expense was incurred—and in this case, the work was done in December. The $500 expense is counted as a December expense even though the money will not be paid out until January 3. The recording of expenses with the related revenues is associated with another basic accounting principle known as the .