Situation Action - Assets Action - Liabilities Action - Equity Comment

Company had increase of Add Cash of A None Add RE of (A+B) Reflected in RE from
revenue (A+B) on Add Account IS
Income Statement Receivables of B

Company receives Add Cash Add Liability (advance None Later removed in
deferred revenue payment) Liability and
recognized in RE

Company records None Remove Liability Add RE Income registered at

deferred revenue (advance payment) the time the flight is
taken

Company had COGS of A Remove A from None Remove A from RE

Inventory
Company issues equity, Add Cash equivalent None Add Contributed Capital
someone invested to
become shareholder,
company repurchases /
sells its stock

Company pays dividends Remove from Cash Remove from RE Not in net income

Company borrows Add Cash equivalent Add Loan Payables None

money
Company records None Add as Interest Payable Remove from RE Expense that is
interest expense recognized before it
is actually paid
Part of ops cash
flow

Company pays back loan Remove from Cash Remove from Loan None Part of financing
Payables cash flow
Company signs an None None None No effect on
employment contract assets/liabilities at
and employee starts time it is signed
later (e.g. next month)

Company signs an None Add amount not paid as Remove from Retained Payables are trickled
employment contract Salaries Payables Earnings down to Retained
and employee worked Earnings through
but didn’t get paid income statement

Company has salary None Add Accrued Wages Remove from RE Expense that is
expense recognized before it
is actually paid

Company purchases Remove Cash paid None None Pre-paid insurance

insurance and pays first Increase asset for Pre- has become an asset
monthly premium (pre- paid Insurance since you do not
paid insurance) (prepayments and have to pay it later
accrued insurance)

Company has pre-paid Remove from Pre-paid None Remove from RE Expense that is
insurance expense Insurance recognized after it
is actually paid
Company purchases a Remove Cash None Remove Depreciation Accumulated
stand (or other PPE) Add Asset Value from RE depreciation and
(property plant and impairments >> can
equipment) be a separate line in
Remove Depreciation BS, or in PPE
from Asset Value calculation

Company sells stand Add Cash for price sold Add gain in RE
(PPE) at gain Remove PPE salvage
value

Company sells stand Add Cash for price sold Remove loss from RE
(PPE) at loss Remove PPE salvage
value

Company (PPE) is Remove impairment Remove impairment No sale made. Only

impaired value (book value-fair expense (book value-fair adjusting for
value) from PPE value) from RE impairment
+ depreciation + depreciation

1st 1st 1st None Raw materials are

Company purchases Remove Cash paid (e.g. Add account payable / reported as
inventory and makes 150) trade payable (e.g. 50) historical cost not
partial payment Add Inventory value current value
(e.g. 200) 2nd (amount originally
nd
2 Add account payable / paid)
Company purchases 2nd trade payable (e.g.
more inventory and Remove Cash paid (e.g. 100) for new inventory
makes payment to 100 for inventory and Remove account
supplier 50 for old one) payable / trade
Add Inventory value payable (e.g. 50) for
(e.g. 200) old inventory

Company has internal None None None Not added if

R&D and patents internally
developed! External
patent / trademark
added in goodwill,
intangible assets
(non-current assets)