Accounting ??

Question

Ok... if a revenue exceeds an expense and there aren't dividends and liabilities remain unchanged then...

-Your Equity increases AND your assets do too right?

Answer 1

if the revenue exceeds the expense then your profit goes up.it is up to you to decide whether to reinvest the profit or retain it

Answer 2

i am a cpa. the answers you have received are correct, but not entirely. yes, assets = liabilities + equity (balance sheet). however, revenue is not an asset. revenue is found on the income statement. the formula for the income statement is:

revenue - expenses = net income/loss

net income/losses (or retained earnings/deficit) are part of the equity section so it will transfer to the balance sheet.

when revenue is recorded, assets will most likely increase. specifically it will be either cash or accounts receivable. and if revenue exceeds expenses, you will have a net profit, which transfers to the equity section of the balance sheet.

so in your scenario, assets and equity will increase.

Answer 3

Right! Assets = Liability + Owner's Equity

Answer 4

Yes - it's all about the accounting equation (assets = liabiltiies + stockholder's equity). If you add something to one side, you have to balance it with an addition to the other side. Revenue is an asset and becomes stockholder's equity without dividends or liabilities to offset it.