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Summary for the course ''Business economics 1: Accounting'. This summary was written in order to study for the midterm as well as for the final. Everything you need to know is available in this summary.
Advice: this summary alone will not be enough, ...
Assets: debit for increase
credit for decrease
Liabilities: credit for increase
debit for decrease
Equities: credit for increase when it goes up on the own side do the name of the
o own side. When it goes down do the other side name
debit for decrease
Revenues: credit for increase
debit for decrease
Expenses: debit for increase
credit for decrease
Notes payable: loans (short or long term)
Accounts payable: credit side
Accounts receivable: debit side
Chapter 3
Revenues are recognized when the goods are services are delivered.
* When cash is received before services → unearned revenue, but cash is recognized.
* When services are done before cash → accounts receivable, but revenues are recognized
Expenses are recognized in the period in which goods and services are used
Prepaid expense: paid before services are performed
Cost of goods sold: it’s an expense when you sell. You recognize the buying price.
Retained earnings: revenues – expenses
Chapter 4
deferred revenue: first cash and then service
accrued revenue: first service and then cash
If you pay 500 euro in advance it will become a revenue when you leave the plane.
(in cash-based accounting it instantly becomes revenue)
The moment you will use an asset it will become an expense, before that it isn’t an expense
Closing the books: revenue – all expenses = retained earnings
add or subtract the additional retained earnings from the original retained earnings on the beginning
journal.
2
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