CH 3 Notes - b Give cash(Asset decreases 2 Cash is paid...

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Cash is received after the act is performed Receive cash received in future (Account Receivable) Give revenue Accounts receivable is an asset and Revenue is a revenue account Identify the financial effect. Accounts receivable increases and revenue increase When you credit an asset you reduce it. Unearned revenue is a liability, NOT a revenue (promise to provide service in the future). So when you receive payment for a service you will perform in the future. Gift card is a promise to pay in the future Expenses Acrual method Cost is incurred to conduct business in that given period. Match revenues generated with expenses. (Matching principle). Depending on the timing of payments: 1. Cash is paid at the same time as the cost incurred a. Receive (incur) ______ Expense (expense so I/S, increases)
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Unformatted text preview: b. Give cash (Asset, decreases) 2. Cash is paid before the cost is incurred a. Receive (incur) prepaid _______ (Asset, increases) b. Give cash (Asset, decreases 3. Cash paid after the cost is incurred a. Receive (incur) ____ Expense (increase) b. Give Accounts Payable (promise to pay) increases Assets = Liability + SE Assets = Liability + Contributed Capital + RE Assets = Liability + C.C. + Beg RE + NI – Dividends Assets = Liability + C.C. + Beg RE + (Revenue – Expenses) – Dividends If you debit an expense you LOWER RETAINED EARNING Summarize Trial balance to check Debits are Equal to credits Start w/all assests (on debit side) Then All Liabilities (in credit side) Then SE (on credit side) Then all Revenues (credit) Then Expenses (debit)...
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