Basic Impact of Everyday Journal Entries on The Income Statement

Effects of Basic Tranactions on Income Statement and Cash Flow Statement

Income Statement Description

Issuance of stock to investors (owners)

Account Titles Cash

Dividends

Purchase of a long term asset. I.e. Equipment, furniture, or fixtures for cash payment

Asset Title

Advance payment from a customer for payment of services or sales to be performed at a future date Providing the services or sales that the company is in the business to perform for cash. Providing the services or sales that the company is in the business to perform on credit. Customer will pay at a later date in time. Payment of cash on Account for items purchases early on credit.

MJC 2017

Expenses

Net Income

Cash Flow

FA

Common Stock

Payment of a dividend to the company’s owners also known as stockholders

Purchase of a long term asset. I.e. Equipment, furniture, or fixtures for cash down payment and the balance on credit.

Revenues

Cash

Cash

FA

IA

Asset Title Cash

IA

Notes Payable Cash

OA

Unearned Sales Revenues Cash

OA

Service Revenue Accounts Receivable

Service Revenue Accounts Payable Cash

OA

1

Effects of Basic Tranactions on Income Statement and Cash Flow Statement Income Stathement Description Received cash on account from customers who owes money to the company for services or sales. Payment of regular monthly bills with cash such as rent, utilities, or salaries.

Recording of monthly expenses on account (credit) Bills accrued at month’s end The purchase and prepayment of an asset with cash before it is used by the company. I.e. Insurance, rent, or supplies. The purchase and prepayment of an asset on credit before it is used by the company. I.e. Insurance, tickets, rent, or supplies. Borrowing money from a bank

Account Titles

Revenues

Expenses

Cash

Net Income

Cash Flow OA

Accounts Receivable Rent Expense Cash

OA

Telephone Expense Accounts Payable

Account Titles

Prepaid Insurance

Cash

IA

Supplies

Accounts Payable

Cash

FA

Notes Payable Purchase of items for resale to customers on credit

MJC 2017

Inventory Accounts Payable

2