Understanding Operating Transactions: Revenue, Expenses, and

School: University of Washington - Course: ACCTG 219 - Subject: Accounting

Deep Dive: Operating Transactions

Operating Transactions • Revenue is recorded when earned (when service happens/good delivered) • Expenses are recorded when incurred (when activity happens)

Operating Transactions What are the impacts on the accounting equation forOCTOBER? 1. On October 31st a man comes in to purchase new brakes for his bike. He pays the shop $140 for the brakes and an additional $20 to install them on his bike. The bike shop bought the brakes from the brake supplier for $80 on account back on October 15th . 2. On October 31stthe bike shop pays $50 in cash for October's utilities. Assets = Liabilities + Stockholders' Equity

Operating Transactions What is the bike shops net income for October? How much inventory is left on the balance sheet at the end? Assets = Liabilities + Stockholders' Equity