Accounting Demystified phần 3 pdf

26 Accounting Demystified

notes payable. As stated in Chapter 2, a basic guide is that any

account with the word receivable in its title is an asset, and any

account with the word payable in its title is a liability.

Revenues are the money earned by the company, such as

sales or interest income. Except for the account Unearned rev￾enue (which is a liability), any time you see the word revenue

in the account name, you should figure that it is a part of the

revenues section of the Income Statement. Except for the ac￾count Prepaid expenses (which is an asset), any time you see

the word expense in an account title, you should figure that the

account goes on the Income Statement in the expenses section.

Analogies to Personal Life

Think of your personal life. You go to work, and you get paid.

Let’s say your salary was $1,000 for the week. When you get

paid, you get a check for $1,000 (let’s forget about taxes to

make the example simple). Journal entries always contain at

least one debit and one credit, and the total of the debits

equals the total of the credits. So what needs to be recorded?

You now have $1,000, so that has to be recorded—we have

to increase the balance in the Cash account (also called the

checking account). We increase Cash by debiting it, so that is

the first part of the journal entry: a debit to Cash.

We can’t stop there, because now we need a credit in order

to balance the entry. Let’s think about this. We got $1,000 be￾cause we worked for it. We have recorded the money we now

have; what remains is to record that we earned the money—to

record the revenue. To increase Revenue, we credit it, which

works out perfectly, since we need a credit to balance the jour￾nal entry.

If we pay $300 for rent, we need to record that we no longer

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