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Question on General Workbook for Adjustments in Accounting - Kephrem1 - 05-02-2013
I am working on creating worksheets for adjustments and I am a bit confused.
I have uploaded my entries, which to my knowledge are accurate however, below are top level questions that I have,
In the adjustments section in blue Do we enter all expenses being recorded as Dr. as Dr makes an expense go up and Cr. respective assets that are impacted by this to keep Dr $ = Cr $?
Why is Accumul Depre Equipment entered as a Cr, and not against Equipment ? & is this considered an Asset?
Why is Interest Payable entered as a Cr, and not against Notes Payable above because I consider this to be a liability against an asset? & is this considered an Asset?
Last question regarding Bal. Sheet in the workbook, why are you entring the $1.4K in Dr for income statement and then in Cr in Bal. Sheet?
Thank you all for your help in advance! When answering if you could please break it down for me to simplify the logic so I could understand, it would be much appreciated!!
Thanks,
Question on General Workbook for Adjustments in Accounting - amilitab4k9 - 05-02-2013
In the adjustments section in blue Do we enter all expenses being recorded as Dr. as Dr makes an expense go up and Cr. respective assets that are impacted by this to keep Dr $ = Cr $?
The wording on your question is a bit confusing to me, but your document looks correct. You must always balance Dr & Cr. It looks like you understand what you're doing there.
Why is Accumul Depre Equipment entered as a Cr, and not against Equipment ? & is this considered an Asset?
Equipment is an Asset. Accumulated Depreciation lowers the book value of that asset and is considered a contra-asset account. As contra means against, Accumulated Depreciation has a Cr balance, to counteract the Equipment's Dr balance. It is always listed just below the Equipment account and is subtracted from Equipment to find the carrying (book) value of the equipment.
Why is Interest Payable entered as a Cr, and not against Notes Payable above because I consider this to be a liability against an asset? & is this considered an Asset?
Interest Payable and Notes Payable are both Liabilities, not Assets. They are things you owe. If you take out a $3000 loan payable in 3 years, that is your Note Payable. The periodic interest that you pay on that is your Interest Payable. They are both liabilities and therefore Cr accounts.
Last question regarding Bal. Sheet in the workbook, why are you entring the $1.4K in Dr for income statement and then in Cr in Bal. Sheet?
You enter it as Dr and Cr to keep everything in balance. Remember that Dr doesn't always mean positive and Cr negative, their meanings are only in relation to the account you are working in. The amount is a Cr in Income Statement because it is from the Service Revenue account, which maintains a Cr balance. It is reflected as a Dr on the Balance Sheet because Assets are Dr accounts and that income was (likely) turned into assets, whether cash, supplies, etc.
I hope this helps, if you need further explanation just ask. Since I don't know the question/information behind your spreadsheet, my answers are based on the accounting concepts behind the numbers and maybe not where the exact numbers came from.