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What is the effect of the adjusting entry for Depreciation expense?
The entry increases total assets and increases total expenses
Is an asset similar to an expense?
No. An asset is anything of value a company owns. An expense is the cost of the company to conduct regular business. Expenses include such things as Salaries/wages for employees, insurance, taxes, electricity, supplies, etc. There are expenses related to the cost of obtaining assets, such as supply expense, however the supply expense is not used until the assets themselves are used. For example, you purchase $500 in supplies, upon doing inventory of your supplies you have $300 left, at this point you deduct (credit) your supplies to reduce on hand and debit supply expense. Expenses do not directly effect assets, but instead effects Income. Assets are listed on the Balance Sheet (expenses are not) Expenses are listed on the Income Statement (Assets are not)
Is accrued income effect Profit and Loss Account?
yes it do effect it should be credited in your profit and loss a/c
An accrued revenue adjustment has what effect on net income?
it will increase your income and Accounts recievable
What would be the effect of outstanding expense on accounting equation?
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
When revenue is accrued what is the effect on assets and income respectively?
Both Increase. Accounts Receiveable (asset) goes up as a debit and Sales (income) goes up as a credit.
When en expense is paid in cash net what is the effect on net assets and profit?
net assets decrease and profit decreases
What is the effect of the adjusting entry for Depreciation expense?
The entry increases total assets and increases total expenses
Is an asset similar to an expense?
No. An asset is anything of value a company owns. An expense is the cost of the company to conduct regular business. Expenses include such things as Salaries/wages for employees, insurance, taxes, electricity, supplies, etc. There are expenses related to the cost of obtaining assets, such as supply expense, however the supply expense is not used until the assets themselves are used. For example, you purchase $500 in supplies, upon doing inventory of your supplies you have $300 left, at this point you deduct (credit) your supplies to reduce on hand and debit supply expense. Expenses do not directly effect assets, but instead effects Income. Assets are listed on the Balance Sheet (expenses are not) Expenses are listed on the Income Statement (Assets are not)
Different types of depreciation?
Net basisWhen a depreciable asset is sold, the business recognizes gain or loss based on net basis of the asset. This net basis is cost less depreciation.ImpairmentAccounting rules also require that an impairment charge or expense be recognized if the value of assets declines unexpectedly.[6] Such charges are usually nonrecurring, and may relate to any type of asset. Depletion and amortizationDepletion and amortization are similar concepts for minerals (including oil) and intangible assets, respectively. Effect on cashDepreciation expense does not require current outlay of cash. However, the cost of acquiring depreciable assets may require such outlay. Thus, depreciation does not affect a statement of cash flows, but cost of acquiring assets does. Historical costDepreciation is generally recognized under historical cost systems of accounting. Some proposals for fair value accounting have no provision for depreciation expense. Accumulated depreciationWhile depreciation expense is recorded on the income statement of a business, its impact is generally recorded in a separate account and disclosed on the balance sheet as accumulated depreciation, under fixed assets, according to most accounting principles. Accumulated depreciation is known as a contra account, because it separately shows a negative amount that is directly associated with another account. Without an accumulated depreciation account on the balance sheet, depreciation expense is usually charged against the relevant asset directly. The values of the fixed assets stated on the balance sheet will decline, even if the business has not invested in or disposed of any assets. The amounts will roughly approximate fair value. Otherwise, depreciation expense is charged against accumulated depreciation. Showing accumulated depreciation separately on the balance sheet has the effect of preserving the historical cost of assets on the balance sheet. If there have been no investments or dispositions in fixed assets for the year, then the values of the assets will be the same on the balance sheet for the current and prior year.
Is accrued income effect Profit and Loss Account?
yes it do effect it should be credited in your profit and loss a/c
What effect does depreciation expense have on net income and cash flow?
Depreciation Expense reduces net income and has no effect on cash flow.
An accrued revenue adjustment has what effect on net income?
it will increase your income and Accounts recievable
What would be the effect of outstanding expense on accounting equation?
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
What is the effect of compound interest?
The effect of compound interest is that interest is earned on the accrued interest, as well as the principal amount.
Increasing interest expense will have what effect on EBIT?
decrease it
How does paying divedends effect assets?
It reduces cash in the bank.
