Question

Account Title Presented below are a number of transactions. Determine whether each transaction affects common stock, dividends, revenues, expenses, or does not affect stockholders' equity. Provide titles for the revenues and expenses. Select Not applicable for account title if neither a revenue nor an expense. Transaction Affects (a) Costs incurred for advertising. (b) Cash received for services performed. (c) Costs incurred for insurance. Amounts paid to employees Cash distributed to stockholders. (0) Cash received in exchange for allowing the use of the company's building. Costs incurred for utilities used. (d) (e) (h) Cash purchase of equipment, (0) Cash received from investors.

Answer 1

Transaction Affects Account title

a)Costs incurred for advertising Expenses Marketing / Distribution expense

b)Cash received for services performed Revenue Sales Revenue

c)Costs incurred for insurance Expenses General/Administrativeexpenses

d)Amount paid to employees Expenses Selling expenses (incurred either

before or after the sale is made)

e)Cash distributed to stockholders Dividend Not applicable

f)Cash received inexchange for allowing the

use of company's building Eg: Rent Revenue General / Administrative expense

g)Cost incurred for utiities used Expense General/Administrative expense

h)Cash purchase of equipment Does not affect Not applicable #

   shareholders equity

i)Cash received from investors Common stock Not applicable #

# They are neither revenue nor expense and not shown in income statement .Dividends are reduced from Retained earnings under shareholder's equity head ,of Liabilities and Equity fund .   Purchase of equipment is a non current asset and depreciation is charged over the life of asset . Common stock comes under shareholder's equity head of Liabilities and Equity fund