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Accounting Equation
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66 Q&A
What is owner's equity?

What is the double-entry system?

What are accrued expenses and when are

they recorded?

What is equity?

What is a liability?

What is retained earnings?

What entry is made when selling a fixed

asset?

Where does revenue received in advance

go on a balance sheet?

What is the statement of financial position?

How do cash dividends affect the financial

statements?

How are the balance sheet and income

statement connected?

What is a balance sheet and why is it

prepared?

What is the meaning of debtor?

How do you report a write-down in

inventory?

Why are expenses debited?

What is the difference between cost and

expense?

What is a temporary account?

What are income statement accounts?

How do you record an owner's money that is

used to start a company?

What is a capital account?

Why are revenues credited?

What is stockholders' equity?

What is the accounting equation?

Would you please explain unearned

income?

What are the effects of depreciation?

What is the expanded accounting equation?

What is meant by owner's draws?

How, when and why do you prepare closing

entries?

What does overstated mean?

How does an expense affect the balance

sheet?

Is sales tax an expense or a liability?

What is net income?

Is it possible for owner's equity to be a

negative amount?

Where is accrued income reported in the

balance sheet?

What is a customer deposit?

Why are assets and expenses increased

with a debit?

What are accrued revenues and when are

they recorded?

If inventory is understated at the end of the

year, what is the effect on net income?

What is the difference between a balance

sheet of a nonprofit organization and a for-
profit business?

What is the accounting entry to close the

sole proprietorship drawing account?

If a company earns a profit, which balance

sheet items change?

What does understated mean?

What is the book value per share of stock?

Why is the P&L profit entered on the credit

side of the balance sheet?

Why is Rent Expense a debit and Service

Revenues a credit?

What is a credit?

Is it okay to have negative amounts in the

equity section of the balance sheet?

What are some tips to make learning debits

and credits easy?

What is the entry when merchandise has

been received but not the vendor's invoice?

Why would Prepaid Insurance have a credit

balance?

A credit is not a normal balance for what

accounts?

How does the accounting equation stay in

balance when the monthly rent is paid?

Will every transaction affect an income

statement account and a balance sheet
account?

Why are sales a credit?

What does double entry mean?

What is the bookkeeping equation?

Why is the accuracy of inventory valuation

so important?

Is contributed capital a noncurrent asset or a

current asset, and is it a debit or credit?

What are the stockholders' equity accounts?

When will a transaction affect only one side

of the accounting equation?

What is the transaction approach and

balance sheet approach to measuring net
income?

Why does a company's profit appear as a

credit on its balance sheet?

Are liabilities always a bad thing?

Should an owner's compensation be

recorded as an expense or in the Drawing
account?

In bookkeeping, why are revenues credits?

If an accrual adjusting entry increases an

expense and a liability, how does the
balance sheet remain in balance?

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About the Author

Harold Averkamp (CPA, MBA) has worked as a
university accounting instructor, accountant, and
consultant for more than 25 years. He is the sole
author of all the materials on AccountingCoach.com

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