ACCT 211 Study Guide - Quiz Guide: Preferred Stock, Issued Shares, Common Stock
Document Summary
The accounting equation: assets = liabilities + equity 4. Balance sheet normal balance explanations 5. Income statement normal balance explanations 7. Key point: debits and credits do not mean favorable or unfavorable. A debit to an asset increases it, as does a debit to an expense. A credit to a liability increases it, as does a credit to a revenue. Revenue accounts are also called sales revenue, sales, income. Rent expense, salaries expense, advertising expense, utilities expense. Key point: nearly every business" goal is to make a profit (also called net income). Thus, you want your revenue credits to exceed your expense debits. If the expense debits exceed the revenue credits, a debit balance (or a net loss) results. The accounting equation: assets = liabilities + equity. Accounts payable, notes payable, wages payable, unearned income. Therefore, a company wants the assets (debits) to exceed the liabilities (credits) in order for the owners" equity to be a positive (credit) number.
