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 | | From: | Dave Costello | | Subject: | Balance Sheets and Servies Rendered - Beginners question! | | Date: | Sat, 22 Jan 2005 09:08:01 GMT |
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 | Hi.
First yr accounting student here so be nice... I am learning about Balance
Sheets and am trying to work out the various categories of assets and
liabilities in which services rendered may be recorded. For example, if an
accounting acitvity is:
"Rendered services for client in exchange for cash"
and we are asked to record this in our Balance Sheet, then our Cash at Bank
increase, but according to the duality (??) convention, something else must
decrease in the liabilities column to balance out. Is there a standard
account that is used in this situation where we have not really outlayed
tangible objects to the client (as opposed to inventory which has a physical
existence), but instead have provided services (time)? In the absence of any
obvious category, do i just balance the increased Cash at Bank with a
matching increase in "Owners Equity"??
Thanks or any help.
Dave
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| | From: | Beverly | | Subject: | Re: Balance Sheets and Servies Rendered - Beginners question! | | Date: | Sat, 22 Jan 2005 08:59:13 -0600 |
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| On Sat, 22 Jan 2005 09:08:01 GMT, "Dave Costello"
wrote:
>Hi.
>
>First yr accounting student here so be nice... I am learning about Balance
>Sheets and am trying to work out the various categories of assets and
>liabilities in which services rendered may be recorded. For example, if an
>accounting acitvity is:
>
>"Rendered services for client in exchange for cash"
>
>and we are asked to record this in our Balance Sheet, then our Cash at Bank
>increase, but according to the duality (??) convention, something else must
>decrease in the liabilities column to balance out.
Actually, if there is an increase in an asset (i.e. cash), then there
is either an INCREASE in a liability, an INCREASE in equity, or a
decrease in another ASSET (notwithstanding a combination of the
above).
>Is there a standard
>account that is used in this situation where we have not really outlayed
>tangible objects to the client (as opposed to inventory which has a physical
>existence), but instead have provided services (time)? In the absence of any
>obvious category, do i just balance the increased Cash at Bank with a
>matching increase in "Owners Equity"??
We don't really have enough information about the circumstances and
the company for there to be a "standard" answer. Like it or not, the
income statement is involved and a question such as this, asking you
to only deal with the balance sheet, is a question that asks you to do
a little thinking about the process.
I'd suggest you journal all the transactions until you reach debits
that are in accounts belonging on the balance sheet. I could give you
various answers dependent upon various circumstances, but that won't
help you learn what this question intends to teach you. It is not
enough to know what accounts are affected; you need to know why.
>
>Thanks or any help.
>
>Dave
>
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| | From: | Joe Canuck | | Subject: | Re: Balance Sheets and Servies Rendered - Beginners question! | | Date: | Sat, 22 Jan 2005 09:18:32 -0500 |
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| Dave Costello wrote:
> Hi.
>
> First yr accounting student here so be nice... I am learning about Balance
> Sheets and am trying to work out the various categories of assets and
> liabilities in which services rendered may be recorded. For example, if an
> accounting acitvity is:
>
> "Rendered services for client in exchange for cash"
>
> and we are asked to record this in our Balance Sheet, then our Cash at Bank
> increase, but according to the duality (??) convention, something else must
> decrease in the liabilities column to balance out. Is there a standard
> account that is used in this situation where we have not really outlayed
> tangible objects to the client (as opposed to inventory which has a physical
> existence), but instead have provided services (time)? In the absence of any
> obvious category, do i just balance the increased Cash at Bank with a
> matching increase in "Owners Equity"??
>
> Thanks or any help.
>
> Dave
>
>
Accounts:
-Fees Earned (revenue account, increase on credit)
-Cash (increase on debit)
There should also be a tax charged account posting. Forget about the
balance sheet at this point, you need to first record these entries with
the appropriate amounts so they can be included on the balance sheet
later on.
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| | From: | John | | Subject: | Re: Balance Sheets and Servies Rendered - Beginners question! | | Date: | Sat, 22 Jan 2005 06:23:38 -0500 |
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"Dave Costello" wrote in message
news:@news-server.bigpond.net.au...
> Hi.
>
> First yr accounting student here so be nice... I am learning about Balance
> Sheets and am trying to work out the various categories of assets and
> liabilities in which services rendered may be recorded. For example, if an
> accounting acitvity is:
>
> "Rendered services for client in exchange for cash"
>
> and we are asked to record this in our Balance Sheet, then our Cash at
Bank
> increase, but according to the duality (??) convention, something else
must
> decrease in the liabilities column to balance out. Is there a standard
> account that is used in this situation where we have not really outlayed
> tangible objects to the client (as opposed to inventory which has a
physical
> existence), but instead have provided services (time)? In the absence of
any
> obvious category, do i just balance the increased Cash at Bank with a
> matching increase in "Owners Equity"??
>
> Thanks or any help.
>
> Dave
hint: look again at the income statement, recording revenue involves more
than entries to a balance sheet account
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| | From: | DMC | | Subject: | Re: Balance Sheets and Servies Rendered - Beginners question! | | Date: | Sat, 22 Jan 2005 13:21:00 GMT |
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| Lets say the text hasnt yet touched upon the concept of Income or Profit and
Loss statements... :). If a student was unaware of such a statement, and
given the transaction "Rendered services to client in exchange for Cash",
how would they best interpret this transaction?
"John" wrote in message
news:1106393051.e3114bd1b65a823a5706125cb1ed35c0@teranews...
>
> "Dave Costello" wrote in message
> news:@news-server.bigpond.net.au...
> > Hi.
> >
> > First yr accounting student here so be nice... I am learning about
Balance
> > Sheets and am trying to work out the various categories of assets and
> > liabilities in which services rendered may be recorded. For example, if
an
> > accounting acitvity is:
> >
> > "Rendered services for client in exchange for cash"
> >
> > and we are asked to record this in our Balance Sheet, then our Cash at
> Bank
> > increase, but according to the duality (??) convention, something else
> must
> > decrease in the liabilities column to balance out. Is there a standard
> > account that is used in this situation where we have not really outlayed
> > tangible objects to the client (as opposed to inventory which has a
> physical
> > existence), but instead have provided services (time)? In the absence of
> any
> > obvious category, do i just balance the increased Cash at Bank with a
> > matching increase in "Owners Equity"??
> >
> > Thanks or any help.
> >
> > Dave
>
> hint: look again at the income statement, recording revenue involves
more
> than entries to a balance sheet account
>
>
>
>
>
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| | From: | Paul A Thomas | | Subject: | Re: Balance Sheets and Servies Rendered - Beginners question! | | Date: | Sat, 22 Jan 2005 10:42:10 -0500 |
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"DMC" wrote
> Lets say the text hasnt yet touched upon the concept of Income or Profit
> and
> Loss statements... :). If a student was unaware of such a statement, and
> given the transaction "Rendered services to client in exchange for Cash",
> how would they best interpret this transaction?
The other side of that entry, in a double entry system, is to an income
account. The net (bottom line) of the income statement flows to the Balance
Sheet to an account for current year profits or losses. This would be an
equity account. So it's possible that what your instructor is looking for
is something in the equity section. That's probably the general type of
entry.
But let's say that the services were already rendered, and the
"sale/revenue" was already booked, and all you are doing is recording the
collection of the money, then the other entry would be to an accounts
receivable, because that is where you would have entered the second half of
the prior revenue entry.
But, let's say you are receiving a payment for service ~to~ be rendered, in
which case your other half of the double entry would go to a liability
account, something along the lines of "prepaid services".
The exact entry will be dictated by more facts and circumstances, and the
accounting policy and methods of the company. The correct entry is what
your instructor tells you it is.
--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net
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| | From: | Joe Canuck | | Subject: | Re: Balance Sheets and Servies Rendered - Beginners question! | | Date: | Sat, 22 Jan 2005 12:24:45 -0500 |
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| Paul A Thomas wrote:
> "DMC" wrote
>
>>Lets say the text hasnt yet touched upon the concept of Income or Profit
>>and
>>Loss statements... :). If a student was unaware of such a statement, and
>>given the transaction "Rendered services to client in exchange for Cash",
>>how would they best interpret this transaction?
>
>
>
> The other side of that entry, in a double entry system, is to an income
> account. The net (bottom line) of the income statement flows to the Balance
> Sheet to an account for current year profits or losses. This would be an
> equity account. So it's possible that what your instructor is looking for
> is something in the equity section. That's probably the general type of
> entry.
>
> But let's say that the services were already rendered, and the
> "sale/revenue" was already booked, and all you are doing is recording the
> collection of the money, then the other entry would be to an accounts
> receivable, because that is where you would have entered the second half of
> the prior revenue entry.
>
> But, let's say you are receiving a payment for service ~to~ be rendered, in
> which case your other half of the double entry would go to a liability
> account, something along the lines of "prepaid services".
>
> The exact entry will be dictated by more facts and circumstances, and the
> accounting policy and methods of the company. The correct entry is what
> your instructor tells you it is.
>
>
>
But it would only be posted to Accounts receivable if it was on account,
and not cash as the original post indicated.
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| | From: | Paul A Thomas | | Subject: | Re: Balance Sheets and Servies Rendered - Beginners question! | | Date: | Sat, 22 Jan 2005 12:43:34 -0500 |
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"Joe Canuck" wrote
> Paul A Thomas wrote:
>
>> "DMC" wrote
>>
>>>Lets say the text hasnt yet touched upon the concept of Income or Profit
>>>and
>>>Loss statements... :). If a student was unaware of such a statement, and
>>>given the transaction "Rendered services to client in exchange for Cash",
>>>how would they best interpret this transaction?
>>
>>
>>
>> The other side of that entry, in a double entry system, is to an income
>> account. The net (bottom line) of the income statement flows to the
>> Balance Sheet to an account for current year profits or losses. This
>> would be an equity account. So it's possible that what your instructor
>> is looking for is something in the equity section. That's probably the
>> general type of entry.
>>
>> But let's say that the services were already rendered, and the
>> "sale/revenue" was already booked, and all you are doing is recording the
>> collection of the money, then the other entry would be to an accounts
>> receivable, because that is where you would have entered the second half
>> of the prior revenue entry.
>>
>> But, let's say you are receiving a payment for service ~to~ be rendered,
>> in which case your other half of the double entry would go to a liability
>> account, something along the lines of "prepaid services".
>>
>> The exact entry will be dictated by more facts and circumstances, and the
>> accounting policy and methods of the company. The correct entry is what
>> your instructor tells you it is.
>>
>>
>>
>
> But it would only be posted to Accounts receivable if it was on account,
> and not cash as the original post indicated.
Payments toward a receivable can be made in cash.
--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net
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| | From: | Joe Canuck | | Subject: | Re: Balance Sheets and Servies Rendered - Beginners question! | | Date: | Sat, 22 Jan 2005 13:38:30 -0500 |
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| Paul A Thomas wrote:
> "Joe Canuck" wrote
>
>>Paul A Thomas wrote:
>>
>>
>>>"DMC" wrote
>>>
>>>
>>>>Lets say the text hasnt yet touched upon the concept of Income or Profit
>>>>and
>>>>Loss statements... :). If a student was unaware of such a statement, and
>>>>given the transaction "Rendered services to client in exchange for Cash",
>>>>how would they best interpret this transaction?
>>>
>>>
>>>
>>>The other side of that entry, in a double entry system, is to an income
>>>account. The net (bottom line) of the income statement flows to the
>>>Balance Sheet to an account for current year profits or losses. This
>>>would be an equity account. So it's possible that what your instructor
>>>is looking for is something in the equity section. That's probably the
>>>general type of entry.
>>>
>>>But let's say that the services were already rendered, and the
>>>"sale/revenue" was already booked, and all you are doing is recording the
>>>collection of the money, then the other entry would be to an accounts
>>>receivable, because that is where you would have entered the second half
>>>of the prior revenue entry.
>>>
>>>But, let's say you are receiving a payment for service ~to~ be rendered,
>>>in which case your other half of the double entry would go to a liability
>>>account, something along the lines of "prepaid services".
>>>
>>>The exact entry will be dictated by more facts and circumstances, and the
>>>accounting policy and methods of the company. The correct entry is what
>>>your instructor tells you it is.
>>>
>>>
>>>
>>
>>But it would only be posted to Accounts receivable if it was on account,
>>and not cash as the original post indicated.
>
>
>
>
> Payments toward a receivable can be made in cash.
>
>
>
Yes, certainly.
But, I've always considered when it says services rendered for cash that
it was not on account.
In which case a more accurate description would have been:
"Rendered services for client on account"
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