When you pay rent it decreases cash but does it decrease capital stock or retained earnings?
If you receive cash for fees earned, it increases cash but does it increase capital stock or retained earnings?
If you pay salaries does it decrease retained earnings or capital stock?
If you pay dividends it decreases cash but what else?
If you pay interest what does it decrease?
These are questions in the book that it says I should know how to do but I don't. If you feel that you don't want to give me the answers, than just tell me how? PLEASE, THANKS.|||Assets = Liabilities + Stockholders Equity
A = L + SE
1. When a company decides to become a corporation, they issue and sell stocks to people who want to own a share. Thus capital stock is money the corporation has from selling stock to stockholders. Then when a company makes profit from its operation activities, it can either pay the profit out to its stockholders in the form of dividends, or it can save its money in an account called Retained Earnings. Both capital stock and retained earnings comprise the Stockholder's Equity section of the accounting equation.
2. When you pay rent it decreases cash but does it decrease capital stock or retained earnings?
This is probably referring to prepaid rent. So when you pay your rent at the beginning of the month, you have not created an expense yet because you have not yet lived there for the month you are paying - this is due to the matching principle. Since no expense is incurred yet, the stockholders equity (cap stock/RE) account won't be changed. Instead, your cash (-A) will go down, and an account called Prepaid Rent (+A) will go up.
3. If you receive cash for fees earned, it increases cash but does it increase capital stock or retained earnings?
This is referring to Accrued Revenues. Since it is a "fee earned," it means you have already earned the money at a prior date, but the customer (or whoever) is finally paying you in cash right now. So earlier when you performed the service (or sent out your product), that was when you increased revenue (+SE) and increased accounts payable (+A). Right now you're receiving the cash from this, so you increase cash (+A) and decrease the accounts payable (-A)
4. If you pay salaries does it decrease retained earnings or capital stock?
When you pay salaries to your employees, you are not going to be taking money from your stockholders. You will be taking money from the company's operating activities to pay them - so you will be taking money from Retained Earnings.
5. If you pay dividends it decreases cash but what else?
When a corporations makes a profit, the money can either be kept as retained earnings, or given to stockholders as dividends. Thus, paying out dividends decreases cash (-A) and decreases Retained Earnings (-SE).
6. If you pay interest what does it decrease?
Paying interested would decrease cash (-A) because you're paying out money, and it would increase Interest Expense (+E, -SE) because interest is an expense.
You really need to study, especially since you didn't know the answer to the first question. Anyways, hope that helps you understand all of it better!|||The answer above is great, except for # 3, instead of accounts payable, your accounts receivable account is decreased.
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|||These pages may be able to help you.
http://www.answers.com/topic/retained-ea鈥?/a>
http://www.answers.com/main/ntquery?s=ca鈥?/a>
Also try www.accountingcoach.com
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