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Accounting Allah shmoop quick review of the math of A

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R and AP Okay So in a nod to the

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many short attention span theater victims and goldfish who watch

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our videos it's time for a quick review of the

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math of accounts receivable in accounts payable Let's just tweak

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are now famous Super Bowl lemonade delivery slightly Remember that

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one right What if rather than the original deal that

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we laid out the NFL had instead said we'll pay

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you after you deliver the one hundred thousand cups of

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lemonade According to the following formula you get fifty grand

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the day after the Super Bowl and then you get

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fifty grand three months later because we want to be

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sure nobody sues us for lousy eliminate that ruined their

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game We of course say yes Because well they are

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the NFL which stands for no freakin lawyers How would

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the numbers then look on our income statement next quarter

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and the following quarter Well we'd recognize the cash paid

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this quarter right but would we recognise all hundred grand

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of the revenues Aren't the gods really high the NFL

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will pay us Well yes but we don't get the

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revenues for three months so best practices gap accounting would

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make a note of that either We would not recognize

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the second fifty grand worth of revenues until next quarter

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or we'd add a line called deferred revenues so we're

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recognizing them light that way Once they become full fledged

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revenues next quarter fifty grand will evaporate from our deferred

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revenues line and our accounts receivable line as well And

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then fifty grand will go into our revenues line just

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like a normal revenues line right Well the same works

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in the other direction The NFL has a good jillion

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dollars in cash It's just sitting around in their Wells

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Fargo savings account But they show in accounts payable of

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one hundred grand because they're also following conservative gap practices

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and they presume that they will end up owing you

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that full hundred thousand dollars The only question revolves around

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whether that hundred grand is a current thing they owe

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quickly or something they like in years later So when

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the fifty grand transfers on the day of the Super

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Bowl the account payable on the NFL's book goes from

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one hundred grand to fifty grant and that remaining fifty

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grand owed then goes away from the accounts payable line

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T plus ninety days when the final check is written

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and cashed That's it all just kind of goes away

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when the payment happens The basic gist revolves Run physics

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and karma For every action there is an equal and

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opposite reaction And if you mess with the NFL well 00:02:28.383 --> [endTime] you're probably going to lose well oh

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