1. Analyzing Transactions
LO 2c – Analyzing Transactions that Affect Income Statement Accounts

2. Income Statement Accounts
LO 2
Income Statement Accounts
Credit for increases (+)
Debit for decreases (–)
Revenue Accounts
Income Statement Accounts
Credit for decreases (–)
Debit for increases (+)
Expense Accounts
Less

3. LO 2
Transaction D
On November 18, NetSolutions received cash of $7,500 from customers for services provided.
On November 18, NetSolutions received cash of $7,500 from customers for services provided.

4. Accounting Equation Impact
LO 2
Transaction D
Accounting Equation Impact
Assets = Liabilities Owner’s Equity (Revenue)
On November 18, NetSolutions received cash from a customer for performing services. Journalize this increase in assets by debiting Cash. As in all journal entries, write the date in the first column, and then write the title of the account in the Description column. Write $7,500 in the Debit column of the journal. NetSolutions’ revenue account is called “Fees Earned.” As in all journal entries, write the name of the account credited in the Description column, slightly indented. Enter the $7,500 in the Credit column. Notice that the date is written only once. Add a brief explanation, using as many lines as necessary. Skip a line in the journal between each journal entry.
increase
increase

5. LO 2
Transaction E
On November 30, NetSolutions incurred the following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.
Throughout the month, NetSolutions incurred the following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.

6. Accounting Equation Impact
LO 2
Transaction E
Accounting Equation Impact
Assets = Liabilities Owner’s Equity (Expense)
Enter the date in the Date column, and enter the name of each expense account on its own line in the Description column. Write each debit “flush” with the left margin of the Description column. Notice that the date is entered only once. An entry with more than one debit and credit is called a compound journal entry. Credit Cash for the total paid for expenses. Write the credit to Cash in the Description column, slightly indented, from the margin. Enter the amount of cash paid, $3,650, in the Credit column.
All four expense accounts increase
decrease

7. LO 2
Transaction G
NetSolutions purchased $1,350 of supplies on November 10. Chris Clark determined that the cost of supplies on hand on November 30 was $550.
On November 30, a count revealed that $550 of supplies were on hand at the end of the month.

8. Accounting Equation Impact
LO 2
Transaction G
Accounting Equation Impact
Assets = Liabilities Owner’s Equity (Expense)
Supplies were originally purchased in the amount of $1,350. When the count is done at the end of the month and only $550 of supplies remain on hand, that means that $800 of supplies have been used up in operations. To record this, enter the date in the first column. Write the account debited, Supplies Expense, in the Description column. Enter the amount, $800, in the Debit column. Remember, increases in expenses cause owner’s equity to decrease, which is why we debit Supplies Expense. Write the account credited, Supplies, in the Description column. Enter the amount, $800, in the Credit column. Add a brief explanation after the credit.
decrease
increase

9. Income Statement Accounts
LO 2
Income Statement Accounts
Debits
Credits
Revenue accounts… Decrease (-) Increase (+)
Expense accounts… Increase (+) Decrease (-)
Expense accounts work opposite revenue accounts. Since increases in expenses cause owner’s equity to decrease, we record increases in expenses as debits. Decreases in expenses are recorded as credits.