Accounting Notes.docx - Accounting Notes Revenue Revenue is...

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Accounting NotesRevenue:Revenue is income generated through providing services or products to customers. When revenue is generated, a revenue account is increased.Examples of revenue accounts for businesses providing services include: Service Revenue, Rent Revenue, and Subscription Revenue. Examples of revenue accounts for businesses selling products include Sales, Furniture Sales, and Automobile Sales.Revenue increases net income, which in turn increases owner's equity.Expenses:An expense is recorded when items are used to operate the business. For example, when utilities are used, the Utilities Expense account is increased.Examples of expense accounts include Utilities Expense, Rent Expense, Insurance Expense, and Wages Expense.Expenses decrease net income, which in turn decreases owner's equity.Other Changes to Owner's Equity:Two items other than revenues and expenses affect owner's equity: Investments by Owner and Drawing.Investment by Owner occurs when the owner invests (deposits) assets in the business. Typically the investment is cash, but it may include equipment or other items. The Capital account is an owner's equity account used to accumulate investments by the owner. An investment by the owner increases owner's equity but is not a revenue or expense account.Drawings represent withdrawals of cash by the owner during a specific period. The Drawing account is a temporary owner's equity account used to accumulate the amount of cash withdrawn by the owner. Drawing decreases owner's equity but is not a revenue or expense account.None of These:Items that do not cause changes to owner's equity include assets and liabilities.Assets are items owned by a company. Assets do not cause owner's equity to increase or decrease. Examples of assets include Cash, Accounts Receivable, Inventory, Prepaid Insurance, Supplies, Land, Buildings, and Equipment.Liabilities are amounts owed by a company. Liabilities do not cause owner's equity to increase or decrease. Examples of liability accounts include Accounts Payable, Notes Payable, Deferred Revenue, and Wages Payable.Required:
Fill in the missing dollar amounts to complete the balance sheet.Ward CompanyBalance SheetDec 31AssetsCash$Accounts Receivable28,000Prepaid Rent28,400Supplies5,700Total Assets$72,500LiabilitiesAccounts Payable$23,200Deferred RevenueTotal Liabilities48,000Equity
CapitalTotal Liabilities and Equity$EXPLANATIONIn this problem, you are asked to find the missing amounts in a balance sheet. Before beginning to solve this problem, let's first define the balance sheet:The balance sheet lists the balances in the asset, liability, and permanent owner's equityaccounts for a specific day (usually the end of a specific period). The balance sheet proves that the total assets are equal to the total liabilities and owner's equity on that specific date.Solution:The following explanation is divided into four parts: Assets, Liabilities, Equity, and Total Liabilities and Equity:1.AssetsThe equation for Total Assetsin the above balance sheetis:

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