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Accounting 115 Chapter 3

Accounting 115 Chapter 3 - ⁃ Expenses The outflows of...

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Chapter 3 The Accounting Cycle The Ledger The place where all of the accounts are summarized T-Accounts Increases are recorded on one side and Decreases on the other Debit /Credit do NOT mean increase / decrease Rules of debit and credit A = L + OE Assets Debit = Increase Credit for decrease Liabilities + Owners' Equity Debit = Decrease Credit = Increase Double Entry Accounting Debit Balances = Credit Balances The Journal Chronological entry of every transaction Nothing changes between the journal and the ledger Net Income Not an asset Increase in owners' equity from profits of the business Assets increase, liabilities decrease, owners' equity increases Retained Earnings Basically the profits of the entire business year Revenues and Expenses Revenue -The inflow of assets by selling a product or a service
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Unformatted text preview: ⁃ Expenses - The outflows of assets in the process of earning revenue ⁃ The Realization Principle ⁃ Revenues are recorded when earned not when the cash is attained (Accrual Accounting) ⁃ The Matching principle ⁃ Expenses are recorded when they are incurred not when paid (Accrual Accounting) ⁃ Debits and Credits for Revenue and Expense ⁃ Expenses decrease Owners' Equity ⁃ Credit for decrease ⁃ Debit for increase ⁃ Revenues increase Owners' Equity ⁃ Credit for increase ⁃ Debit for decrease ⁃ Dividends (Not an expense) ⁃ Distributions of Retained Earnings ⁃ Debit for Increase ⁃ Credit for decrease ⁃ Capital Stock ⁃ Debit for decrease ⁃ Credit for increase ⁃...
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Accounting 115 Chapter 3 - ⁃ Expenses The outflows of...

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