BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -A decrease in owner’s equity resulting from the operation of a business is called an expense. When cash is paid for expenses, the business has less cash. Therefore, the asset account, Cash, is decreased. The owner’s equity account, Barbara Treviño, Capital, is also decreased by the same amount.

Detailed explanation-2: -Expenses cause owner’s equity to decrease. Since owner’s equity’s normal balance is a credit balance, an expense must be recorded as a debit. At the end of the accounting year the debit balances in the expense accounts will be closed and transferred to the owner’s capital account, thereby reducing owner’s equity.

Detailed explanation-3: -All decreases in owner’s equity are a result of expenses. Accounting periods should be of equal length to facilitate comparison between periods. Failure to record the adjusting entry for depreciation will overstate assets in the balance sheet.

Detailed explanation-4: -The owner’s equity generally has a credit balance, and a debit will decrease its balance. Similarly, the cash account has a debit balance, and a credit will reduce its balance. Therefore, a withdrawal is a transaction that decreases cash and decreases owners’ equity.

Detailed explanation-5: -An increase in owner’s equity resulting from the operation of a business is called revenue. When cash is received from a sale, the total amount of assets and owner’s equity is increased.