Random Facts about Accounting

Question 1

What are nominal accounts? What are examples?

Answer 1

Nominal accounts are really just subcategories of Retained Earnings and are reduced to a zero balance through the closing process at the end of each accounting period.
Revenues, Expenses, Dividends

Question 2

Are Revenues a Debit or a Credit?

Answer 2

Credit

Question 3

Are Expenses a Debit or a Credit?

Answer 3

Debit

Question 4

How do you calculate Net Income?

Answer 4

Sales - Cost of Goods Sold - Operating Expenses - Other Expenses - Tax Expense - Loss/Gain from discontinued operations - Extraordinary loss/gain = Net Income

Question 5

How do you determine credit worthiness?

Answer 5

Allowance for bad debts (beginning) / accounts receivable (beginning)
Compare to
Allowance for bad debts (end) / accounts receivable (end)