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Since a business that seeks to increase its sales level will require more assets to meet that goal, some provision must be made to accommodate the change in assets. To phrase it another way, the business must have some plan to actually finance the new assets that will be needed to increase sales.
Whether one uses a debit or credit to increase or decrease an account depends on the normal balance of the account. Assets, Expenses, and Drawings accounts (on the left side of the equation) have a normal balance of debit. Liability, Revenue, and Capital accounts (on the right side of the equation) have a normal balance of credit.
A business pays salaries with cash: You increase salary (expenses) by recording a debit transaction, and decrease cash (asset) by recording a credit transaction. The totals show the net effect on the accounting equation and the double-entry principle, where the transactions are balanced.
Lighter Side. Medicare. News
“In retirement, theoretically, all you have to do for a great long-term return is keep enough cash for expenses for a few years, then invest in broad core indexes like the S&P 500,” Smith says.
Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position. Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently."
In financial accounting, a cash flow statement, also known as statement of cash flows, [1] is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities.
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