Cash Payment of Expenses

A cash payment is a transaction in which a business settles the cost of an expense immediately in cash.

Suppose a business has a monthly premises rent of 1,000 and pays the amount in cash to the landlord.

Cash Payment Journal Entry

At the end of the month the business needs to enter the cost of the rent for that period, the cash payment journal entry is as follows:

Cash Payment Journal Entry
Account Debit Credit
Rent expense 1,000
Cash 1,000
Total 1,000 1,000

The Accounting Equation

The Accounting Equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities of the business This is true at any time and applies to each transaction. For this transaction the Accounting equation is shown in the following table.

Cash Payment – Accounting Equation
Assets = Liabilities + Owners Equity
Cash = None + Reserves
-1,000 = + -1,000

In this case the asset of cash has been decreased by 1,000 and the income statement will have a rent expense of 1,000. The expense in the income statement reduces the net income which reduces the retained earnings and therefore the owners equity in the business.

Popular mdct.ru Examples

Another mdct.ru example for you to discover.

Cash Payment of Expenses November 6th, 2016

Related pages

accrual journalcalculating profitability indexpetty cash transactions examplespayback formula exceldegree of total leverage formulafv pmt formulacalculating pmtdouble decline depreciationallowance for loan losses journal entriesstandard costing journal entriesprepare a contribution format income statementcash denomination formatvendor statement reconciliationannuity present value excelaccounts receivable debit or credithow to calculate markup percentsingle entry book keepingaccruals and prepayments journal entriespayroll accrual journal entrycn accounts payableshare purchase accounting entriestrade discount series formulamoney ledger templateformula for equity multiplierdepreciation schedule straight line methodexcel chart of accounts templatedividend declaration templatechanging from lifo to fifomargin formula excelbasic accounting ledgertemplate voucherpercentage of completion method formulathe basic accounting equation cannot be restated asprepayment journal entryperforma of trial balancebookkeeping journalsgeneral ledger accounts examplesprovision for uncollectible accountsreceivable control account formathow to calculate interest rate in excelannuity due payment formulamarketable securities accountinginstallment notescurrent assets current liabilities ratio analysisprepaid expenses meansperiodic inventory system and perpetual inventory systemsundry expenses examplespresent value of an annuity formulapension accounting journal entriesprofitable indexbad debt expense on balance sheetfixed cost per unit formulapercentage complete formula excelending inventory calculationdelivery term fobaccounting for convertible debenturesaccounting template for exceldetailed accounting equationprofitability indexaccounts receivable with recoursebookkeeping tutorialsinterest accrualspre operative expenses meaningbills payable entrybookkeeping entrieswhat is consigned inventorywhat are retained earningunearned credittotal manufacturing overhead varianceobjective of bookkeepingcalculate percentage markupaccounts receivable days outstanding formulainvestment turnover formulapetty cash voucher formatoverhead expenses examplesimprest account entrywhat is an installment noteexcel templates for accounting