Hello! Sorry to bother everyone but I need help badly! I am just now getting started in my accounting class and do not understand something ... revenues ... I am trying to make an income statement but when I get to certain parts I get confused ... So can someone tell me what exactly falls under revenue and what exactly falls under expenses.

Does Cash fall under revenue what about Cash withdrawl by owner would that go under expense! Like I said I am brand new to this and just need specific examples of what goes under each category!

Thank you for taking the time to help me! :o

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Originally Posted by vaemt

So can someone tell me what exactly falls under revenue and what exactly falls under expenses.

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Revenues are income that your company has earned.

Expenses are costs that your business have incurred related to your earning your revenue and other business expenses.

Quote:

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Originally Posted by vaemt

Does Cash fall under revenue what about Cash withdrawl by owner would that go under expense! Like I said I am brand new to this and just need specific examples of what goes under each category!

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Cash has nothing to do with revenue or expense, it is an asset, reported on the balance sheet.


EXAMPLE
I shovel the snow from your driveway. I charge you $10 and you pay me in cash.

I have just made a sale, so my Journal Entry (JE) would be:

Debit Cash 10 (since I am receiving cash from you, an asset, goes on the balance sheet)
Cr. Revenue 10 (revenue, goes on the income statement)

Now, you are probably wondering how did I shovel your driveway, didn't I have to buy a shovel? That is true.

Last week when I bought my shovel, I gave the store $7 for it.

So my JE for that would be:
Dr. Shovel/Equipment 7 (an asset, goes on the balance sheet)
Cr. Cash 7 (an asset, goes on the balance sheet)

Let's say I want to do some advertising for my business. I give the local newspaper $2 to put my ad in their paper.

My journal entry would be:
Dr. Advertising expense 2 (an expense that goes on the income statement)
Cr. Cash 2 (an asset that goes on the balance sheet).

Now, let's say I, as the owner, which to withdraw $6 from the business for my own personal use.
Dr. Owner's Drawings 6 (contra equity account, on the balance sheet)
Cr. Cash 6 (asset, on the balance sheet)

The reason I am not expensing me taking $6 out of the business, is because it is MY business.

Let's say I had to pay one of my employee's a salary of $6.

I would:
Dr. Salary Expense (an expense that goes on the income statement)
Cr. Cash 6 (asset, on balance sheet)