Service Revenue Accounting Equation

Assets 88 100 cash 66 800 accounts receivable 5 000 supplies 500 prepaid rent 1 800 equipment 5 500 truck 8 500 liabilities 200 equity 87 900 common stock 30 000 net income 57 900 from revenue of 60 000 salary expense 900 utility expense 1 200.

Service revenue accounting equation. Service revenues include work completed whether or not it was billed. Pays 600 for ads that were run in recent days. In economics revenue will help know the sales of given quantity of goods and services. Transactions 5 6 sole proprietorship transaction 5.

When you draw up your company s income statement for the year the month or the quarter you calculate your service revenue for that period. The basic accounting equation requires that a company s total assets equal total debts plus total equity. The second effect is a 600. Service revenue is the money your company earns from selling its services.

Chauffeuring planning funerals maintaining lawns photographing a wedding and others. The accounting equation for services on account the accounting equation assets liabilities owners equity means that the total assets of the business are always equal to the total liabilities of the business this is true at any time and applies. A service is provided to the customer and the service revenue is taken to the income statement. The effect of this advertising transaction on the accounting equation is.

The final accounting equation would be. Since asc is paying 600 its assets decrease. Revenues have an incremental effect on the equation because they increase retained earnings which ultimately feed into equity. To help you better understand how the accounting equation works and stays in balance here are more sample transactions and their effects to the accounting equation.

In addition to transactions 1 2 and 3 in the previous lesson assume the following data. Under the accrual basis of accounting the service revenues account reports the fees earned by a company during the time period indicated in the heading of the income statement. Revenue should be reported to the government periodically so that the government could know the total income of the country and collect the taxes. Rendered services and received the full amount in cash 500.

In a financial glossary equity investor money shareholder capital and owner capital mean the same thing.