F4 POA - Double Entry for Expenses and Revenue

F4 POA - Double Entry for Expenses and Revenues

EXPENSES

What is an Expense?

Business EXPENSES are the costs of carrying on a trade or business.

An expense may also be defined as a recurring payment of a business to a vendor for a service or continued use of a product or service.

Double Entry for Expense Accounts

EXPENSE ACCOUNTS ARE DEBITED

When a payment is made for an expense, the asset cash or bank is decreased. 

Because this decrease must be shown by a credit entry to these accounts, the expense account must be debited to complete the double entry process for that transaction.

Always NAME the expense in the account in the title.

Multiple Choice

Paid the wages for the month $400 by cheque. What is the double entry to record this transaction?

• Debit Cheque and Credit Wages

• Debit Wages and Credit Bank

• Debit Wages and Credit Cheque

• Debit Bank and Credit Wages

Multiple Choice

Paid $80 cash for travelling expenses.

• Debit travelling expense

  Credit cash

• Debit cash

  Credit travelling expenses

• Debit expense

  Credit cash

• Debit cash

  Credit expense

REVENUE

What is Revenue?

REVENUE is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. 

In addition, a company might earn additional revenue from renting part of its premises (rent received), receiving interest from the bank (bank interest received), etc.

Double Entry for Revenue Accounts

REVENUE ACCOUNTS ARE CREDITED

When money is received the asset cash or bank is increased. This is shown by a debit entry to the asset account. Therefore, the revenue account must be credited to complete the double entry process for that transaction. 

Multiple Choice

Paid rates by cheque. Debit...

• Rates

• Cheque

• Bank

Multiple Choice

Paid rates by cheque. Credit....

• Rates

• Cheque

• Bank

Multiple Choice

Paid staff by cheque. Debit...

• Expense

• Bank

• Staff

• Cheque

Multiple Choice

Rent received by cheque. Debit....

• Bank

• Rent

• Rent received

• Cheque

Multiple Choice

Received rent by cheque. Credit...

• Rent received

• Rent

• Bank

• Cheque

Double Entry Practice

6th Edition Page 66 Ex. 8.5

5th Edition Page 58 Ex. 6.5