Chapter 2 - The effect of revenue and expenses. After completing this chapter, students will be able to: Analyze business transactions involving revenue and expenses, record the effects of revenue and expenses in the accounting equation, compute net income or net loss. | CHAPTER TWO The Effect of Revenue and Expenses 1. Analyze business transactions involving revenue and expenses. 2. Record the effects of revenue and expenses in the accounting equation. 3. Compute net income or net loss. THE EFFECT OF REVENUE AND EXPENSES Objectives: 2- Revenue, Expenses, and Net Income The employment services provided by Rebecca Van Lieu will produce revenue, or income. In producing the income the business will incur business costs, or expenses. 2- Revenue, Expenses, and Net Income (Continued) The revenue remaining after the expenses have been deducted is net income, or net profit. The amounts that a firm’s customers have promised to pay in the future is an asset known as accounts receivable. 2- Revenue, Expenses, and Net Income (Continued) Money received from customers from credit sales is referred to as money received on account. In Chapter 1 we learned that the liability incurred by a business when it promises to pay its creditors is called . | CHAPTER TWO The Effect of Revenue and Expenses 1. Analyze business transactions involving revenue and expenses. 2. Record the effects of revenue and expenses in the accounting equation. 3. Compute net income or net loss. THE EFFECT OF REVENUE AND EXPENSES Objectives: 2- Revenue, Expenses, and Net Income The employment services provided by Rebecca Van Lieu will produce revenue, or income. In producing the income the business will incur business costs, or expenses. 2- Revenue, Expenses, and Net Income (Continued) The revenue remaining after the expenses have been deducted is net income, or net profit. The amounts that a firm’s customers have promised to pay in the future is an asset known as accounts receivable. 2- Revenue, Expenses, and Net Income (Continued) Money received from customers from credit sales is referred to as money received on account. In Chapter 1 we learned that the liability incurred by a business when it promises to pay its creditors is called accounts payable. 2- Transaction At the end of the first week of operations, Rebecca Van Lieu received $1,000 for resume preparation and job placements. 2- Transaction Analysis The asset cash is increased by $1,000. Owner’s equity is increased by $1,000. 2- Transaction At the end of the first week of operations, Van Lieu pays a salary of $300 to her assistant. This expense causes changes in the assets and the owner’s equity. 2- Transaction Analysis The asset Cash is decreased by $300. Owner’s equity is decreased by $300 in expenses. 2- Accounting Terminology Accounts Receivable Expenses Net Income Net Loss Paid on Account Received on Account Revenue 2- Chapter Summary The inflow of assets received from business operations--usually from providing services or selling goods--is known as revenue. The costs of business operations are called expenses. Revenue can be obtained in the form of cash or accounts receivable. 2- Chapter Summary(continued) Accounts receivable are
