Meaning of Exceptional account balances and examples
unusual/unexpected amounts in accounts that may need investigation.(Negative cash balance, Very high expenses in one month, Large unpaid customer invoice)
Chart of accounts meaning
list of all accounts a business used to record financial transaction
Net Income Vs Net loss meaning
profit a business after subtracting expenses from its revenue.
a business’s expenses are greater than its revenue.
Revenue VS Expenses meaning/ Examples
drawing
- earning money - earned 10k from selling clothes
- spending money to help the business generate revenue - 6k rent for business
- owner withdraws for personal use
Accounting equation
A=L+OE+Revenue-expensis-Drawings
Revenue recognition principle meaning
revenue must be recorded in the accounts when the transaction is completed. Recorded when the bill is sent to the customer. For a cash transaction, it’s recorded when the sale is complete andthe cash is received.
format of an income statement
- 3-4$
- Revenue/expenses
- Who what when(ended month),
- 3-4 underlines
- fees earned, totale expenses, net income
- alphabetical.
Purchase on account meaning T
item purchased on credit, to be paid later
+Debit left, asset | +Right credit A/P
Sale on account meaningT
item sold on credit, cash not received at time of sale
+Debit left, A/R | +Right credit Capital
Payment on accountT
money paid to A/P to decrease amount owed
-Credit Right, Bank | -left Debit A/P
Receipt on accountT
money received from A/R to decrease amount to be received
+Debit Right, Bank | -left Debit A/R
What belongs on + debit and +credit for T chart
D= Assets, Drawings, Expenses
C= Liabilities, Equity, revenue
If not then its minus
Elements of a balance sheet
5$, 5 underlines, Titile (who,what,when), assets - liab↓ OE, capital, Total L,E
How to format a trial balance with RED
Who, what, when
left, names of accounts
middle Debits
Right, credits
Assets
Liabilities
Drawing
…Earned
Expenses
Total = Total
4 underlines
no$
