Accounting Chapter 3 Notes

Revenue will affect receivable and service revenue

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Unformatted text preview: Furniture. We do this because we need to keep the original cost of furniture separate from the recovery (depreciation) of that cost because of the historical cost principle. - Accumulated Depreciation: is the sum of all depreciation recorded for the asset, and that total increases (accumulates) over time. - It is the contra asset, which means that it is an asset account with a normal credit balance. I.E Contra means opposite. - Contra Account has two main characteristics 1. A contra account is paired with and follows its related account 2. A contra account’s normal balance (debit or credit) is the opposite of the balance of the related account. Posting of depreciation appears as follows " ASSETS EXPENSES NORMAL ASSET CONTRA ASSET Furniture Accumulated Depreciation- furniture Depreciation expense –furniture May 3 $18,000 May 31 300 May 31 300 Bal $18,000 Bal 300 Bal 300 Book Value - Book Value: Resulting net amount (cost minus accumulated depreciation) of a plant asset EX: Book Value of the furniture; Book Value of Plant Assets: Furniture……………………………………………………………..… $18,000 Less: Accumulated depreciation- furniture………………. 300 . Book Value of the furniture …………………………………….. $17,700 If it was more than one asset it would look like; Plant Assets on the Balance Sheet of Smart Touch Learning (May 31) Plant Assets Furniture 18,000 Less: Accumulated depreciation – furniture 300 $17,000 Building $48,000 Less: Accumulated depreciation- building 200 47,800 Plant assets, net $65,500 Accrued Expenses - Accrued expense: An expense that hasn’t been paid for yet. EX: Empl...
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