business accounting/ the difference between assets, liability, and owner's equity

Revenue (asset, liability, or owner's equity)

Owner's equity

Rohan received $570 in cash for services recognized in an earlier transaction (which accounts are affected)

accounts receivable(asset) , cash(asset)

Rohan received $570 in cash for services recognized in an earlier transaction (how is the account equation affected)

accounts receivable- decreased -570 , cash-increased +570

Rohan preformed $600 of delivery services on account (how is the account equation affected)

accounts receivable- increased +600 , Service fee- increased +600

Rohan received $570 in cash for services recognized in an earlier transaction. (what happened)

customer payed on their account for a previous service

Delivery fee

revenue

Service fee

revenue

consulting fee

revenue

interest fee

revenue

sales

revenue

Liability(definition)

something owned to another business entity

Rohan purchased supplies for $80 in cash (how is the account equation affected)

supplies- increased +80 , cash-decreased -80

Rohan payed $50 for phone bill (how is the account equation affected)

telephone expense- increased +50 , Cash-decreased -50

Revenues(definition)

the amount a business charges customers for products sold or services performed (Earn money)

Accounts receivable (definition)

the amount of money owned to the business by its customers as a result of making sales "on account" or "on credit" (the customers have promised to pay sometime in the future)

accounting period concept(definition)

the concept that income determination can be made on a period basis (monthly, quarterly, yearly)

Expense(definition)

the decrease in assets (or increase in liability) as a result of efforts to produce revenues (always decreases owner's equity)

Net loss(definition)

the excess of total expenses over total revenues for the period. (expenses are greater than revenues/you spend more than you make)

Net income(definition)

the excess of total revenues over total expenses for the period (revenues are greater than expenses/ you make more than you spend)

Three different ways the accounting equation may be expressed:

1) assets=liability + owner's equity 2)assets - liability= owner's equity 3)assets - owner's equity= liability

Three questions to ask when you're analyzing business transactions

1)what happened 2) which accounts are affected 3)how is the accounting equation affected

Rohan performed $600 of delivery services on account (which accounts are affected)

Accounts receivable (asset) , Service fees/or delivery fee(Revenue/ owner's equity)

Rohan purchased supplies for $80 in cash (which accounts are affected)

Supplies(asset) , cash(asset)

Rohan payed $50 for phone bill (which accounts are affected)

Telephone expense (expense/ owner's equity) , Cash (asset)

Owner's Equity (definition)

amount by which the business assets exceed the business liabilities

Accounts Payable(definition)

an unwritten promise to pay a supplier for assets purchased or services received (referred to as making a purchase on account or on credit)

Accounts Receivable (asset or liability?)

asset

Buildings

asset

Cash

asset

Fixtures

asset

Furniture

asset

Land

asset

Machinery

asset

Merchandise

asset

Rohan purchased delivery equipment for $300 cash and $1,200 on account (what happened)

bought equipment with cash and on account

Rohan payed $200 for rent (which accounts are affected)

cash (asset), rent expense(owner's equity)

Rohan paid for an eight-month liability insurance policy with $200 cash. Insurance is paid in advance and will provide future benefits (which accounts are affected)

cash(asset) , Prepaid insurance(asset)

Rohan purchased delivery equipment for $300 cash and $1,200 on account (which accounts are affected)

cash(asset) , accounts payable(liability) , equipment(asset)

Rohan performed services and received $500 in cash (which accounts are affected?)

cash(asset), service fee(revenue/owner's equity)

types of asset accounts

cash, accounts receivable, equipment, supplies, prepaid insurance

Rohan paid for an eight-month liability insurance policy with $200 cash. Insurance is paid in advance and will provide future benefits (how is the account equation affected)

cash- decreased -200, Prepaid insurance- increased +200

Rohan performed services and received $500 in cash (how is the account equation affected?)

cash- increased +500, Revenue- increased +500

Rohan purchased delivery equipment for $300 cash and $1,200 on account (how is the account equation affected)

cash-decreased -300 , accounts payable-increased 1,200 , equipment- increased +1,500

electricity expenses

expense

rent expenses

expense

telephone expenses

expense

wage expenses

expense

types of owner's equity accounts

expenses, drawing, revenues

Notes payable(definition)

formal written promises to pay suppliers or lenders specified sums of money at definite future times

Asset

items owned by a business that will provide future benefits. (Must be owned not rented)

Accounts payable (asset or liability)

liability

Notes payable (asset or liability)

liability

Wages payable (asset or liability)

liability

Owner's Equity is also called:

net worth and capital

Rohan payed $200 for rent (what happened?)

paid for rent

Rohan payed $50 for phone bill (what happened)

paid phone with cash

Rohan performed services and received $500 in cash(what happened?)

performed a service for cash

Rohan performed $600 of delivery services on account (what happened)

performed delivery service but did not get paid

Rohan payed $200 for rent (how is the account equation affected?)

rent expense-increased +200 , Owner Equity-decreased -200 , cash- decreased -200

Rohan paid for an eight-month liability insurance policy with $200 cash. Insurance is paid in advance and will provide future benefits (what happened)

used $200 cash to prepay eight-month insurance

Rohan purchased supplies for $80 in cash (what happened)

used cash to buy supplies