02-17-2008, 07:04 PM
<b>Answer 1</b>
<b>Income / Revenue</b> is the financial value of goods and services sold to customers.
Income increases Capital and that makes it a CREDIT entry.
Income is the opposite of Expenses and is, therefore, treated in the opposite way. On the other hand, it is treated the same as Liabilities.
Increases in Income are CREDITED to the appropriate Income account; while the decreases in Income are DEBITED.
<b>Answer 2</b>
<b>Capital</b> is the total of resources invested and left in a business by its owners. In other words, Capital is the amount owed to the owner of the business; by the business.
Yes, it is a liability to a business because it is what the business owes to its owner.
<b>Answer 3</b>
The whole financial accounting is based upon a very simple idea which is known as the accounting Equation. The accounting equation demonstrates that the Assets of the business are always equal to its liabilities plus Capital.
<center><b>Assets = Liabilities + Capital
=> Resources In the business = Resources Supplied ( By the owner + by the third parties)</b></center>
Whereâ¦.
<b>Assets</b> = The actual resources that are in a business
<b>Capital</b> = What the business owes to its owners
<b>Liabilities</b> = What the business owes to the third parties
Therefore, the two sides of the equation will always have the same total because we are dealing with the same thing from two different point of views.
Hope that helps!
<b>Income / Revenue</b> is the financial value of goods and services sold to customers.
Income increases Capital and that makes it a CREDIT entry.
Income is the opposite of Expenses and is, therefore, treated in the opposite way. On the other hand, it is treated the same as Liabilities.
Increases in Income are CREDITED to the appropriate Income account; while the decreases in Income are DEBITED.
<b>Answer 2</b>
<b>Capital</b> is the total of resources invested and left in a business by its owners. In other words, Capital is the amount owed to the owner of the business; by the business.
Yes, it is a liability to a business because it is what the business owes to its owner.
<b>Answer 3</b>
The whole financial accounting is based upon a very simple idea which is known as the accounting Equation. The accounting equation demonstrates that the Assets of the business are always equal to its liabilities plus Capital.
<center><b>Assets = Liabilities + Capital
=> Resources In the business = Resources Supplied ( By the owner + by the third parties)</b></center>
Whereâ¦.
<b>Assets</b> = The actual resources that are in a business
<b>Capital</b> = What the business owes to its owners
<b>Liabilities</b> = What the business owes to the third parties
Therefore, the two sides of the equation will always have the same total because we are dealing with the same thing from two different point of views.
Hope that helps!
