1. Chpt 5-2 Equity Transactions & Accounting Standards

2. Equity Transactions Revenue Transaction Example Eve Boa, a lawyer, draws up a legal agreement for J. Basso, a client and for her services is paid a fee of $450 in Cash

3. ExpenseTransaction Example Ex. 1 - Eve Boa writes a $3300 cheque for the monthly rent payment. Ex. 2 - Eve Boa receives the monthly utilities bill for $395 from Municipal Gas. The bill is not immediately paid.

4. Drawings Transaction Example Ex. 1 - Eve Boa, the owner of the business, withdraws $1975 for her personal use. Ex. 2 Eva Boa purchases a coffee maker through the business from Kitchen Plus for her own personal use.

5. Fiscal Period Unlike a balance sheet an income statement __________________________, usually one 12 month period. Therefore the date on the Income Statement must be recorded as: _________________December 31, 20-5

6. Accounting Standards 1. The Time Period Concept The _______________provides that accounting will take place over _______________known as fiscal periods.

7. 2. Revenue Recognition The revenue recognition convention states that ________________at the time the _____________________. Usually this occurs when the _______to the customer after the ____________...revenue is recorded at that point. For large construction projects, the construction company would send _________and _________________________________.

8. 3. Matching Principle The matching principle states that each _____________related to revenue earned must be ______ ___________________________ __________________________. ***Very important principle***

9. Critical Thinking Questions 1. If you were to start your own business, how long would you want your fiscal period to be? Why? 2. If assets have a debit balance then why do expenses also have a debit balance? Explain. 3. Why do you think the matching principle is so important?