Effects of Basic Tranactions on Income Statement and Cash Flow Statement

Income Statement
Description

Issuance of stock to
investors (owners)

Account Titles
Cash

Dividends

Purchase of a long term

asset. I.e. Equipment,
furniture, or fixtures for
cash payment

Asset Title

Advance payment from a

customer for payment of
services or sales to be
performed at a future date
Providing the services or
sales that the company is
in the business to perform
for cash.
Providing the services or
sales that the company is
in the business to perform
on credit. Customer will pay
at a later date in time.
Payment of cash on
Account for items
purchases early on credit.

MJC 2017

Expenses

Net
Income

Cash Flow

FA

Common Stock

Payment of a dividend to
the companys owners also
known as stockholders

Purchase of a long term

asset. I.e. Equipment,
furniture, or fixtures for
cash down payment and
the balance on credit.

Revenues

Cash

Cash

FA

IA

Asset Title
Cash

IA

Notes Payable
Cash

OA

Unearned Sales
Revenues
Cash

OA

Service Revenue
Accounts
Receivable

Service Revenue
Accounts Payable
Cash

OA

Effects of Basic Tranactions on Income Statement and Cash Flow Statement

Income Stathement
Description
Received cash on account
from customers who owes
money to the company for
services or sales.
Payment of regular monthly
bills with cash such as rent,
utilities, or salaries.

Recording of monthly
expenses on account
(credit) Bills accrued at
months end
The purchase and
prepayment of an asset
with cash before it is used
by the company. I.e.
Insurance, rent, or
supplies.
The purchase and
prepayment of an asset on
credit before it is used by
the company. I.e.
Insurance, tickets, rent, or
supplies.
Borrowing money from a
bank

Account Titles

Revenues

Expenses

Cash

Net
Income

Cash Flow
OA

Accounts
Receivable
Rent Expense
Cash

OA

Telephone
Expense
Accounts Payable

Account
Titles

Prepaid Insurance

Cash

IA

Supplies

Accounts Payable

Cash

FA

Notes Payable
Purchase of items for
resale to customers on
credit

MJC 2017

Inventory
Accounts Payable