Chapter 5 - The Expanded Ledger: Revenue, Expenses, And Drawings Flashcards
What decreases equity
An expense - the cost for operating a business
What increases equity
Revenue or income increases equity - resulting from the sales is goods or service
What is an income statement
It Is a financial statement which lists the revenue and expenses as well as the net income or net loss for a given period of time
What is net income
Iris the difference between total revenues and total expenses
When is it net income
If total revenue > total expenses
When is it net loss
Total revenue < total expenses
What is a fiscal period (also known as financial period it accounting period)
The time over which earnings are measure
What is GAAP - time period concept
It is a concept that says that accounting will take place over a specific period known as fiscal periods
What is the GAAP - Matching Principle
The revenue and the expense must be recorded during the same period of time
What is the revenue recognition principle
Revenue is to be recorded in the accounts at the time transactions are complete
What is revenue
Related to the sales of goods or service
What is expense
Costs related to the revenues
What are drawings
Which are the owners withdrawals for personal use
What is a chart of accounts
It’s a list of the ledger accounts and their number arranged in ledger order
What is the equity equation
- beginning capital + net income - drawings = ending capital
- beginning capital - net loss - drawings = ending capital
