R2R meaning and deferrals

This is very helpful for freshers.

1. Record to Report (R2R)

2. Meaning Record to Report ( R2R ) is a Finance and Accounting (F&A) management process which involves collecting, processing and delivering relevant, timely and accurate information. It provides strategic, financial and operational feedback on how a business is performing.

3. What Expect from GL Report Financial performance and position Key performance indicators /metrics Business commentary on the performance Reconciliation of actual results to budget, forecast and prior year results

4. Deferrals A deferral refers to money paid or received before a product or service has been provided. Deferral Accounting based on the revenue recognition principle which dictates that revenues be recognized in the period in which they occur, and the matching principle which dictates expenses to be recognized in the period in which they are incurred. Deferrals are bifurcated into 2 parts Deferred Revenue and Expenses.

5. Deferred Revenue Deferred revenue is Income a company has received for its products and services, but has not yet invoiced for. It is listed in the Liabilities on the balance sheet. Examples – Insurance Premiums, Prepaid Rent, Deposits on Products, Service Contracts. Journal Entry – When Money Received Journal Entry Remarks Bank /Cash A/c Dr. Balance sheet Asset To Deferred Revenue A/c Balance sheet Liability

6. When Revenue is recognized Final Entry Journal Entry Remarks Deferred Revenue A/c Dr. Balance sheet Asset To Subscription Revenue A/c Income Statement Journal Entry Remarks Bank/Cash A/c Dr. Balance sheet Asset To Subscription Revenue A/c Income statement

7. Deferred Expenses Deferred expenses are expenses a company has prepaid. It is listed in the Asset section of the balance sheet. Examples – Prepaid Rent, Deposits on Products, Service Contracts. Journal Entry – When Money Paid Journal Entry Remarks Deferred Expenses Balance sheet Asset Ban k A/c

8. When Products or Services Received Final Entry Journal Entry Remarks Subscription A/c Income statement To Deferred Expenses A/c Knock Off Journal Entry Remarks Subscription A/c Income statement To Bank A/c Balance sheet