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As we know, in accounting and book-keeping, expenses are debited in order to cause a decrease in the owner's (or stockholders') equity. So in this case, we record outstanding expense as:
ASSETS = LIABILITES + CAPITAL
Nil = +(outst. expense) - (outstanding expense)
Outstanding Expenses are added to Liabilities because it is business' CURRENT LIABILITY and deducted from CAPITAL because it causes a decrease in owner's equity.
NOTE: At the time of payment we deduct it from Liabilities as well as from Cash ( or in JOURNAL ENTRY: we debit Outstanding Expense and credit Cash)
ASSETS = LIABILITES + CAPITAL
-outst. exp. = -outst. exp. + Nil
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What is the effect of performing services on account on the basic accounting equation?
-liabilites, +stockholder's equity
Effect of transaction in accounting equation?
Every transactions has some impact on asset or liability or on both.
What is duality concept?
The concept of duality means that every business transaction will have a dual effect on the accounting equation.
What is an expanded basic accounting equation?
The expanded accounting equation replaces Owner's Equityin the basic accounting equation (Assets = Liabilities + Owner's Equity) with the following components: Owner's Capital + Revenues - Expenses - Owner's Draws. In other words, the expanded accounting equation for a sole proprietorship is: Assets = Liabilities + Owner's Capital + Revenues - Expenses - Owner's Draws.In the expanded accounting equation for a corporation, Stockholders' Equity in the basic accounting equation (Assets = Liabilities + Stockholders' Equity) is replaced by these components: Paid-in Capital + Revenues - Expenses - Dividends - Treasury Stock. The resulting expanded accounting equation for a corporation is: Assets = Liabilities + Paid-in Capital + Revenues - Expenses - Dividends - Treasury Stock.The expanded accounting equation allows you to see separately (1) the impact on equity from net income (increased by revenues, decreased by expenses), and (2) the effect of transactions with owners (draws, dividends, sale or purchase of ownership interest).
A business paid 7000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to?
decrease in asset and decrease in liability
What is the effect of performing services on account on the basic accounting equation?
-liabilites, +stockholder's equity
Effect of transaction in accounting equation?
Every transactions has some impact on asset or liability or on both.
What is duality concept?
The concept of duality means that every business transaction will have a dual effect on the accounting equation.
When owners invest money in their business the effect on the accounting equation is that the investment increases what?
increase assets and increase owners equity
What is an expanded basic accounting equation?
The expanded accounting equation replaces Owner's Equityin the basic accounting equation (Assets = Liabilities + Owner's Equity) with the following components: Owner's Capital + Revenues - Expenses - Owner's Draws. In other words, the expanded accounting equation for a sole proprietorship is: Assets = Liabilities + Owner's Capital + Revenues - Expenses - Owner's Draws.In the expanded accounting equation for a corporation, Stockholders' Equity in the basic accounting equation (Assets = Liabilities + Stockholders' Equity) is replaced by these components: Paid-in Capital + Revenues - Expenses - Dividends - Treasury Stock. The resulting expanded accounting equation for a corporation is: Assets = Liabilities + Paid-in Capital + Revenues - Expenses - Dividends - Treasury Stock.The expanded accounting equation allows you to see separately (1) the impact on equity from net income (increased by revenues, decreased by expenses), and (2) the effect of transactions with owners (draws, dividends, sale or purchase of ownership interest).
A business paid 7000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to?
decrease in asset and decrease in liability
A business paid 9000 to a creditor in payment of an amount owed The effect of the transaction on the accounting equation was to?
increase an asset, increase a liability
Where to find the basics of accounting?
Accounting The basic accounting equation is the foundation for the double-entry bookkeeping system. It shows how assets were financed: either by borrowing money from someone (liability) or by paying your own money (shareholders' equity).From the large, multi-national corporation down to the family owned restaurant, every business transaction will have an effect on a company's financial position. The financial position of a company is measured by the following items: 1. Assets (what it owns) 2. Liabilities (what it owes to others) 3. Owner's Equity (the difference between assets and liabilities) The accounting equation (or basic accounting equation) offers us a simple way to understand how these three amounts relate to each other. The accounting equation for a sole proprietorship is: Assets = Liabilities + Owner's Equity The accounting equation for a corporation is:For more information please visit www.accountingchum.com
What would be the effect on the profit of an accounting period if a drawing of 100 was accounted for as an expense by mistake?
If drawings are shown as expenses then it will reduce the current year's profit while it will overstated the capital of company as well.
What effect does depreciation expense have on net income and cash flow?
Depreciation Expense reduces net income and has no effect on cash flow.
How does rendering of services for cash affect the accounting equation?
cash assets increase Equity increases as sales revenue increases and net income increases. No effect on Liabilities and Expenses
Which part of the accounting equation does a sale on account effect?
by sale on account you mean goods sold to the costumer but the cash was not received immediately. the accounting equation for credit sales is to CR the revenue/sales/turnover in your income statement. DR the receivables account on the balance sheet. after the cash is received. CR the receivables account. DR the cash account.
