How do revenues or incomes affect the accounting equation

How do revenues or incomes affect the accounting equation -...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
What are the (possible) ways through which earnings can affect the accounting equations? Starting with the accounting equation: Assets = Total of Capital and Liabilities at current time. This accounting equation includes three entities so we can say that there are three ways in which the earnings (revenues or the income) can affect the accounting equations. Revenues intensification Assets: Considering the obvious factor here, Revenue or earning increases the money. More income means more money and more money means increasing Assets (as cash is a part of Assets). Revenues lower the debts (reduces the liabilities) : Well, this is the second obvious part in this explanation. To start the business or carry further projects, some amount of loans, sponsor-ships or any
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern