Recording Income Statement Transactions - Spreadsheet

Recording Income Statement Transactions – Spreadsheet

Quick Study Sheet

Common Transactions:  An exchange of something for something else.  

Revenues:   

Provide goods or services now and receive an asset now

Earn – revenue
Get – Cash

Provide goods or services now and receive an asset later

Earn – revenue
Get – Receivable (accounts, interest, rent)

Expenses:    

Receive the service now and give up an asset now to pay for it

Incur – Expense
Give up – Cash

Receive the service now and give up an asset later to pay for it

Incur – Expense
Give up – liability – owe for it (_____payable)

Use up an asset as part of operating the business

Incur – Expense
Give up – asset (prepaid, inventory, supplies, depreciation.)

When recording transactions: 

1) Determine if a good or service was provided and the account name used

Sales – provide goods to a customer
Revenues or fees – provide services to a customer
Revenues – provide the use of an asset to someone – rent, interest

2) Determine if something was provided to the company

Expense – name it what you paid for – “_______ expense”

3)  Determine if an asset was used up in day to day business

Provide inventory to a customer: “cost of goods sold”

Use up prepaids or supplies: “_______ expense”, name it what was used

Use a long-term asset: “depreciation expense”

Important:   

When you record revenue you must also increase an asset

When you record an expense you must also reduce an asset or increase a liability

1)  Provide goods or services (revenue +) and receive cash now (cash +)

2)  Provide goods or services (revenue +) and get paid later (receivable +)

3)  Receive a service (expense -) and pay cash now (cash -)

4)  Receive a service (expense -) and pay cash later (payable +)

5)  Use an asset (expense -) and (asset – or accumulated depreciation -)

Owner’s Equity included retained earnings which includes profits, which come from revenues and expenses.  Revenues and expenses are part of owner’s equity.

Revenues and expenses do not have a beginning balance – amounts are for this period only 

Revenues – positive balance
Expenses – negative balance