Impact of Debit and Credit for each Financial Statement Account
To understand double entry accounting, you should understand how a debit or credit impacts each financial statement account (income statement and balance sheet). You need to ask yourself… …“Does a debit increase or decrease the account?. .. Does a credit increase or decrease an account? “ The Universal CPA team maintains a list of the…
What is the journal entry to adjust commission expense?
Most companies will calculate actual commission expense by multiplying net sales by a a commission rate. For example, if the company had $15,000,000 of net sales and a commission rate of 3%, commission expense would be $450,000. So the company may already have a liability for accrued commission on the balance sheet based on estimates….
Does the principal payment on debt impact the income statement?
No, only the interest portion of a debt payment impacts the income statement. The principal portion of a debt payment only impacts the balance sheet. The visual below illustrates the journal entry that the company would record for a debt payment. Most of the payment goes to paying principal, which reduces the debt liability on…
What is the journal entry to record a deferred tax liability?
A deferred tax liability occurs as a result of a temporary difference between taxable income and financial income under U.S. GAAP. A deferred tax liability is when financial income is greater than taxable income, which means that the entity pays a lower tax amount now and will have higher taxes in the future. As the…
What is the journal entry to record a donation of services for a NFP entity?
When someone donates their services, they are really just donating their time. However, the key thing to note that is that donated services must be for skilled labor and not unskilled labor. For example, a lawyer, accountant, or healthcare professional would donate services in the form of their time to provide advice. The professional would…
What is the journal entry to record a contribution of assets for a not-for-profit entity?
When a donor contributes assets (cash, equipment, car, etc.), the value of the donation is measured at fair-market-value (“FMV”). Donations can either be restricted or unrestricted. As you can see in the example below, medical equipment was donated and the FMV was $25,000. For a donation with no restrictions (i.e. unrestricted), the NFP entity would…
What is the journal entry to record a budget deficit?
Under budgetary accounting (governmental funds only), the individual funds will always record their “estimated revenues” — always debited (the $850,000). This will always be credited with appropriation control which represents the total amount that the government has set aside to spend (the $1,000,000). Therefore, the budget control is going to represent the difference between the…
What is the journal entry to record a budget surplus?
Under budgetary accounting (governmental funds only), the individual funds will always record their “estimated revenues” — always debited (the $1,000,000). This will always be credited with appropriation control which represents the total amount that the government has set aside to spend (the $850,000). Therefore, the budget control is going to represent the difference between the…
