formulas
Assets = Liabilities + Equity
What is the accounting equation?
account
detailed record of all increases and decreases that have occurred in asset, liability or equity accounts
accrued revenues
revenues that have been earned but not yet collected
Cash
Asset
Apple received $100 for sale of iPhone.
dr. cash 100
cr. sales revenue 100
Book Value
Price paid - accumulated depreciation = book value
journal
a record of transactions in chronological order.
advance payment of revenue that should be adjusted for amount earned
Notes Payable
Liability
Paid rent for the month, $900
dr. rent expense 900
cr. cash 900
ending retained earnings
Beginning Retained Earnings + Net Income - Dividends
ledger
book or record holding all accounts and their balances
deferred expenses
advance payment of future expenses that are adjusted to show the amount used.
Prepaid Insurance
Asset
Cash dividends of $500 was paid to stockholders
dr. dividends 500
cr. cash 500
Net Income
Revenues - Expenses
trial balance
summary of ledger listing all accounts and their balances.
accrued expenses
expenses that have been incurred but not yet paid.
Unearned Rent Revenue
Liability
Accrued salary expense $1,600
dr. salary expenes $1600
cr. salary payable $1600
debt ratio
total liabilites/total assets
Accrual Basis Accounting
Expenses are recorded as they are incurred, revenue is recorded as it is performed.
Cash Basis Accounting
revenue is only recorded when received. Expenses are only recorded when paid.
Dividends
contra equity account
recorded depreciation on equipment, $20,000
dr. depreciation expense $20,000
cr. accumulated depreciation $20,000