Assets and Liabilities in Accrual process

Accrual process
· Cash received in advance of recognizing revenue => increase in asset (cash) and liabilities (unearned revenue)
· Recognizing revenue before receiving cash => increase in asset (account receivable) and equity (retained earning)
· Cash paid in advance of recognizing expense => decrease in one asset (cash), increase in another asset (prepaid expense)
· Recognizing expense before paying cash => increase in liabilities (accrued expenses), decrease in equity (retained earnings)