33 Analyze record and summarize the effects of operating transactions using the

33 analyze record and summarize the effects of

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- 3.3 Analyze, record, and summarize the effects of operating transactions using the accounting equation, journal entries, and T-accounts. - 3.4 Prepare an unadjusted trial balance.
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o The unadjusted trial balance is a list of all accounts and their unadjusted balances and is used to check on the equality of recorded debits and credits. - 3.5 Evaluate net profit margin, but beware of income statement limitations. o Net profit margin expresses net income as a percentage of revenues. o The income statement indicates whether the company is profitable, but this might not explain whether cash increased or decreased. Also, the income statement does not directly measure the change in company value during the period, and estimation affects income measurement. - Homework Helper: o Revenues Sales Revenue: arise from delivering products in the ordinary course of business Service Revenue: arise from providing services in the ordinary course of business Rent Revenue: amounts earned by renting out company property Interest Revenue: amounts earned on savings and loans to others Dividend Revenue: dividends earned from investing in other companies o Expenses Cost of Goods Sold: cost of products sold in the ordinary course of business Repairs & Maintenance Expense: cost of routine maintenance and upkeep of buildings/equipment Advertising Expense: cost of advertising services obtained during the period Depreciation Expense: cost of buildings and equipment used up during the period Insurance Expense: cost of insurance coverage for the current period Salaries and Wages Expense: cost of employees’ salaries and wages for the period Rent Expense: cost of rent for the period Supplies Expense: cost of supplies used up during the period Delivery Expense: cost of transportation to deliver goods to customers Utilities Expense: cost of power, light, heat, Internet, and telephone for the period Amortization Expense: cost of intangible assets used up or expired during the period Interest Expense: cost of interest charged on outstanding debts owed during the period Income Tax Expense: taxes charged on net income reported for the period - Alternative terms: o Net income also can be called net earnings or net profit. o Prepaid Rent and Prepaid Insurance can be called Prepaid Expenses, which is reported as a current asset on the balance sheet.
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o The income statement may also be called the statement of comprehensive income, statement of earnings, or statement of operations. - Helpful reminders: o To properly understand why Prepaid Expenses is an asset and Deferred Revenue is a liability, emphasize the first word (prepaid and deferred). o If the trial balance doesn’t balance, look at the difference between total debits and total credits. If it is…
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