Continuation- Elements of Accounting Equation

EXPENSES - arise in the course of the ordinary activities of the business.

SALARIES - represent the value of compensation for services received

from employees

RENT - represents the rentals for use of property not owned by the entity.

INSURANCE - cost of insurance pertaining to the current accounting

period.

ADVERTISING - advertising services in promoting the goods and services

of the entity.

TAXES AND LICENSES -amount incurred for business permit, taxes and
licenses.

REPAIRS AND MAINTENANCE - amount of services or the parts used

to repair or maintain entity's assets.

UTILITIES - amount paid for power, electricity, and water.

SUPPLIES - value of supplies used.

DEPRECIATION - portion of the property and equipment that expired

during the period

BAD DEBTS - estimated losses for uncollected account receivable.

INCOME

SERVICE INCOME - amount earned for service rendered to customers.

SALES INCOME - amount earned for the value of goods sold to client.

Income includes both revenue and gains:

a. Revenue arises in the course of the ordinary activities of the business, e.g.
sales and service fees.

b. Gains represent other items that meet the definition of income and may or
may not arise in the course of the ordinary activities of the
entity.

If selling price is greater than carrying amount, the difference is a gain.

If selling price is less than carrying amount, the difference is a loss.

Enrichment

Example:

Your business sells barbecue. The cost of barbecue you have sold is
an expense. The income you derived from selling barbecue is called revenues
or income because selling barbecue is your main business.

One day you decided to replace your old beach umbrella . The
umbrella has a carrying cost of P2,000 in your book of account. The
difference between rgw selling price of P2,200 and the carrying amount of
P2,000 represent gain (P2,200 - P2,00 = 200 gain) This is because selling of
umbrella is

not your main business (not your ordinary business activity.)

If you were able to sell the old umbrella with carrying amount for only
P1,600, the difference now of P400 represent a loss. (P2,000 - 1,600 = 400
loss).
Resources

1. https://study.com/academy/lesson/the-accounting-equation-definition-
components.html#:~:text=The%20three%20categories%20of%20accounts,are%20what%
20a%20company%20owes.
2. https://www.youtube.com/watch?v=nRQJLi6ruDA

3. https://www.youtube.com/watch?v=m808FcyI9TI