![]() ![]() ![]() And since a credit entry is now present in the Service Revenues, your equity will effectively increase as a result. It’s a must for all entries that are debited to equal out as credits, so the business will get a $1,000 credit that gets recorded in Service Revenues. The business’s assets will then increase, and as such, these assets will be recorded as a debit of $1,000 to “cash.” To help you better understand why exactly revenues are credited, consider that a business gets $1,000 for a service that it provides, thus earning that $1,000. Liabilities, on the other hand, are shown on the right side of the accounting equation, with their account balances located on the right side, also known as the “credit side.” Why Revenues Are Credited Since assets are shown on the left side of the accounting equation, the account balance will go there, as well. You may find it helpful to consider the accounting equation of: In this guide, we will discuss what all this means and why revenue has to be recorded as a credit. When dealing with a corporation, credit balances go into what is known as Retained earnings, which is essentially a stockholder’s equity account. The normal balance for your equity is called a credit balance, and as such, revenues have to be recorded as a credit and not a debit.Īt your accounting year’s end, all revenue account credit balances have to be closed and then transferred to your capital account, thus increasing your equity. This will go a long way in helping you make sure that you are entering the correct data each and every time a transaction is completed in your business.Īs a business owner, revenue is responsible for your equity increasing. You always want to be sure that your entries are accurate and correct. Knowing the difference between debits and credits in your bookkeeping will ensure that you and/or your accountants have an easier time balancing your books. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |