IS 3-3 note

Revenue and Expense Accounts
1.Revenue – a separate account is set up for each
distinct type of revenue earned by a company
2.Expense – a separate account is set up for each
type of expense,
◦ The major criteria used to decide whether a separate
expense account is needed are (1) frequency of usage and
(2) dollar value of expenditure
Balance Sheet Accounts
1.Assets – Increase (Debit) Decrease (Credit)
2.Liabilities and OE – Increase (Credit) Decrease
1.Revenue increases Owner’s Equity, therefore
Revenue will act like the Owner’s Equity account.
2.Credit (Increase) Debit (Decrease)
1.Expenses decrease Owner’s Equity therefore they
are the opposite of the OE account
2.Debit (Increase) Credit (Decrease)
3.When the business incurs an expense, it is always
an increase (increased cost to the business)
1.Different Revenue and Expense accounts are
created for management and internal control
Owner’s Drawing Account
1.Records the withdrawal of money or other assets
from the business by the owner
2.Basically anything that is taken out of the company
for personal use
3.Has a debit side of origin because it decreases OE
2.The income statement is prepared first because the
result, the net income or net loss, affects the balance
3.The owner’s capital account and drawings appear in
the OE section of the balance sheet
Example of OE
1.Owner’s Equity
2.C. Cronk Capital September 1
3.Add: Net Income
4.Less: C. Cronk, Drawings
5.Increase in Capital
3 000
6.C. Cronk Capital September 30 $33 000
1. Purchased $300 of office supplies for cash
2. Issued a cheque for $50 for an advertisement in a
local newspaper
3. Received a bill from Office Supply Company for a
desk, chair and filing cabinet at a total cost of
$1100 on account
4. A bill was issued for $900 for services performed
5. A cheque for $100 was sent as a donation to the
Salvation Army
6. A cheque for $300 was received on account
7. Paid Louis’s Service station $120 for gasoline and
repairs to the business automobile
1. 8. Performed a service for T. Wu and received
$200 cash in full payment.
2. 9. The owner withdrew $400 for personal use
1. Dr Office Supplies
Cr Cash
2. Dr Advertising Ex
Cr Cash
3. Dr Office Supplies
Cr Accounts Payable
4. Dr Accounts Receivable Cr Fees Earned
5. Dr Misc. Expense
Cr Cash
6. Dr Cash
Cr Accounts Receiv.
7. De Automobile Ex
Cr Cash
8. Dr Cash
Cr Fees Earned
9. Dr Drawing
Cr Cash
1.Look at page 79
◦ Page 90 Q - 13,14,15
◦ Ex 8,10,11
3.Page 93 Ex 13, 14, 16