An Easy Approach to Accountancy by Rajmohan P R (good novels to read TXT) 📕

If the amount received is a payment from a customer for a sale or service delivered earlier and has already been recorded as revenue, the account to be credited is Accounts Receivable.

If the amount received is the proceeds from the company signing a promissory note, the account to be credited is Notes Payable.

If the amount received is an investment of additional money by the owner of the corporation, a stockholders' equity account such as Common Stockis credited.

Revenues are recorded as Service Revenues or Sales when the service or sale has been performed, not when the cash is received. This reflects the basic accounting principle known as the revenue recognition principle.

Expenses are matched with revenues or with the period of time shown in the heading of the income statement, not in the period when the expenses were paid. This reflects the basic accounting principle known as thematching principle.

The financial statements also reflect the basic accounting principle known as the cost principle. This means assets are shown on the balance sheet at theiroriginal cost or less and not at their current value. The income statement expenses also reflect the cost principle. For example, the depreciation expense is based on the original cost of the asset being depreciated and noton the current replacement cost.

Additional Information and Resources

Because the material covered here is considered an introduction to this topic, many complexities have been omitted. You should always consult with an accounting professional for assistance with your own specific circumstances.

Text: Rajmohan
Images: Bookrix
Editing: Rajmohan
Translation: Rajmohan
Publication Date: 10-03-2016

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Dedication:
To all who are searching accountancy basics.