MIS 302F Lecture Notes - Lecture 5: Accounting Equation, Retained Earnings

• School: UT-Austin
• Department: Management Information Systems
• Course: MIS 302F
• Professor: Tuttle Clint

Document Summary

Softbyte inc. pays its daily news bill in cash. Transaction 5) recorded the bill as an increase in accounts payable and a decrease in stockholders" equity. Observe that the payment of liability related to an expense that has previously been recorded does not affect stockholders" equity. Softbyte recorded the expense (in transaction 5) and should not record it again. Softbyte inc. receives in cash from customers who had been billed for services (in transaction 6). Transaction 9 does not change total assets, but it changes the composition of those assets. Note that the collection of an account receivable for services previously billed and recorded does not affect stockholders" equity. Softbyte already recorded this revenue (in transaction 6) and should not record it again. The corporation pays a dividend of ,300 in cash to ray and barbara neal, the stockholders of softbyte inc. This transaction results in an equal decrease in assets and stockholders" equity.