332 Reserves and Deferrals
Liabilities
Long Term
Synopsis
Account 332 is established to record other reserves for potential losses, advances and miscellaneous unearned income. Items placed into this account should be reasonably anticipated and long term in nature.
|
Debits |
Credits |
|
|
Example 1
Accrue potential losses from pending legal action.
Journal: General
|
Entry: |
|
Debit |
Credit |
|
Account 955 |
Other Deductions |
$40,000 |
|
|
Account 332 |
Reserves and Deferrals |
|
$40,000 |
Example 2
To record payment of environmental remediation invoice against amounts that were reserved in prior year.
Journal: Cash Disbursement
|
Entry: |
|
Debit |
Credit |
|
Account 332 |
Reserves and Deferrals |
$16,000 |
|
|
Account 202 |
Cash in Bank |
|
$16,000 |
Example 3
Deposit received for option on the potential sale of excess dealership property.
Journal: Cash Receipts
|
Entry: |
|
Debit |
Credit |
|
Account 201 |
Cash on Hand |
$25,000 |
|
|
Account 332 |
Reserves and Deferrals |
|
$25,000 |
Example 4
Amortization of unearned income from vendor contract.
Journal: General Journal
|
Entry: |
|
Debit |
Credit |
|
Account 905 |
Other Income |
$400 |
|
|
Account 332 |
Reserves and Deferrals |
|
$400 |
Comments
A credit balance represents an estimated liability and or unearned income.
Professional advice should be obtained regarding tax treatment of unearned income and loss reserves.