Cashpaidafterexpenseisincurred expense incurred

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Unformatted text preview: , the following entry is made: Expense Incurred AND Cash Paid Expense (+E) xxx Cash (­A) xxx 21 The Matching Principle If cash is paid after the company receives goods or services, a liability PAYABLE is recorded. Cash paid after expense is incurred ­ Expense Incurred Expense (+E) xxx Payable (+L) xxx 22 The Matching Principle When cash is paid the PAYABLE is reduced. Cash paid after expense is incurred ­ Expense Incurred Cash Paid Expense (+E) xxx Payable (+L) xxx Cash will be paid. Payable (­L) xxx Cash (­A) xxx 23 The Matching Principle Typical assets and their related expense accounts include. . . CASH PAID FOR as used over time becomes EXPENSE Supplies inventory Supplies expense Prepaid insurance Insurance expense Buildings and equipment Depreciation expense 24 A Question of Ethics 25 A = L + SE ASSETS LIABILITIES Debit Credit for for Increase Decrease Debit Credit for for Decrease Increase Next, let’s see how Revenues and Expenses affect Retained Earnings. 26 CONTRIBUTED CAPITAL RETAINED EARNINGS Debit Credit for for Decrease Increase Debit Credit for for Decrease Increase Expanded Transaction Analysis Model Dividends decrease Retained Earnings. RETAINED EARNINGS Debit Credit for for Decrease Increase Net Income increases Retained Earnings. REVENUES Debit Credit for for Decrease Increase 27 EXPENSES Debit Credit for for Increase Decrease Analyzing Some of Papa John’s Transactions (a) Papa John’s restaurants sold pizza to customers for $36,000 cash and sold $30,000 in supplies to franchised restaurants, receiving $21,000 cash with the rest due on account. Assets = Lia...
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