Principles of accounting Assignment Example | Topics and Well Written Essays - 250 words

Principles of accounting - Assignment Example Each journal entry must have a credit and debit of equal amount. There are different ledgers accounts used in an accounting system such as the cash, expense, account receivable, equity, accounts payable, sales, and depreciation account among others. Each account has a normal balance. If the normal account is a debit the account increases through debit and decreases by way of a credit. When the normal account is credit the account increases through a credit and decreases by a debit. The income statement is a very important financial statement that provides information regarding the profitability of a company during an accounting period. All financial statements are prepared at the end of the accounting cycle. There a certain journal entries that affect only the income statement. An example of a journal entry that affects the income statement is recording a cash sale. For instance if the business makes a sale and the customer pays by cash the corresponding journal entry is a debit to c ash and a credit to sales. Based on the assumption that the normal balance of cash is debit this transaction increases the cash account of the company because the firm received money. The balance sheet is another major financial statement that is regarded as a statement of position.