Essay about Accounting lesson: Accounts Payable

Submitted By dennisdasilva
Words: 352
Pages: 2

Account - Separate record of transactions that increase or decrease a specific asset, liability, owner’s equity, revenue, or expense.

8/1/14 Jim Brown Invested $100,000
8/2/14 Purchased Land $10,000 (I)
8/2/14 Paid Rent $1,000 (O)
8/15/14 Service Fee income $10,000 (O)
8/31/14 Paid Wage Expense 2,000 (O)
8/31/14 Utility Bill Incurred $500
8/31/14 Withdrew $2,000

Operating: Net: $7000
Investing: (10,000)
Financing: net 98,000 _________________ $95,000

Accounts have titles, spaces for increasing, and spaces for decreasing.

T Accounts:

DEBITS MUST EQUAL CREDITS. NORMAL BALANCE SIDE.
ASSETS MUST EQUAL OTHER SIDE OF EQUATION

Assets: Debit Normal Balance Side
Liabilities and Owner’s Equity: Credit Normal Balance Side

Anything that is a payable is a Liability
Long Term Debt is a Liability
Owner’s Equity is investment and drawing from companies

Revenue > Income Statement Credit Normal Balance
Expenses > Income Statement Debit Normal Balance

Assets, Expenses, and Drawing are the debits that increase, everything else is credits.

Drawing is a contra account it works opposite of OE, so debit increases and Credit decreases, basically increasing the drawing account is the same as decreasing the owner’s equity account.

Service Fee Income, Rental Income, Lease Income, Sales, Interest Income etc are considered REVENUE.

Ledger: Assets, Liabilities, OE, Revenue, Expenses

Assets, Liabilities, and OE are Balance Sheet, while Revenue and Expenses are found in…