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In accounting, adjusting entries are journal entries usually made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred. The revenue recognition principle is the basis of making adjusting entries that pertain to unearned and accrued revenues under accrual-basis accounting .
In accrual basis accounting, the matching principle (or expense recognition principle) [1] dictates that an expense should be reported in the same period as the corresponding revenue is earned. The revenue recognition principle states that revenues should be recorded in the period in which they are earned, regardless of when the cash is ...
What is normal, anyway? When it comes to your spending, these numbers show how you stack up against the average.
The normal expense account balance is a debit. [3] In order to understand why expenses are debited, it is relevant to note the accounting equation, Assets = Liabilities + Equity. [ 4 ] Expenses show up under the equity portion of the equation because equity is common stock plus retained earnings and retained earnings are revenues minus expenses ...
If an expense is not deductible, then Congress considers the cost to be a consumption expense. Section 162(a) requires six different elements in order to claim a deduction. It must be an 1) ordinary 2) and necessary 3) expense 4) that was paid or incurred during the taxable year 5) in carrying on 6) a trade or business activity. [2]
Per diem (Latin for "per day" or "for each day") or daily allowance is a specific amount of money that an organization gives an individual, typically an employee, per day to cover living expenses when travelling on the employer's business. A per diem payment can cover part or all of the expenses incurred. For example, it may include an ...
On an income statement, "operating expenses" is the sum of a business's operating expenses for a period of time, such as a month or year. In throughput accounting , the cost accounting aspect of the theory of constraints (TOC), operating expense is the money spent turning inventory into throughput . [ 4 ]
The company will not pay these wages until the next Friday of the following month on July 3; to make sure the company's report remains correct an adjustment must be made. Wage Expense $1000.00 Cash $1000.00 Wage Expense $200.00 Accrued Wages Payable $200.00