Generally Accepted Accounting Principles and Subject Matter Expert

889 Words Oct 28th, 2014 4 Pages
Alpha Corporation hires a subject matter expert at a salary of Rs 5,000 per month including benefits. The subject matter expert is non-billable and is expected to help engineers with resolving their technical queries as well as assist them in development of new technology. The subject matter expert was hired on 1st of February and today is 1st of March of the same year. You have just paid him his salary. What accounts will this transaction impact?
Answer : Engineers cash account increases and company balance decreases . In terms of accounting head : (DR) Salary account (L) (CR) operating expense account ( Bank) (A)
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Is this a transaction? If so, what are the accounts that will be used to capture this transaction?
Answer : Yes it is transaction ,where in dividend is paid to shareholders reducing company profit and distributing the same to the shareholders .
In terms of accounting entry : ????
(DR) dividend account (CR) Bank Account .
Echo Corporation is into farming tractor-manufacturing business. At the end of year 1, their retained earnings are $250, and cash is $100. In year 2, ABC makes a net loss of $30. In year 3, ABC makes a net profit of $50 and also issues dividends of $25 to its shareholders. Due to these transactions, what will be the Retained Earnings on Echo’s Balance Sheet after Year 3? What will be cash after year 3?
Answer :
Retained earning :250 balance at 1st year (30) net loss Year 2 50 profit year 3 (25) dividend year 3 Total :245 $ is the retained earning after 3rd year .
RE(retained earning) are earning kept by the company and not distributed to shareholders .
RE is balance (250 + profit - loss –dividend ) Cash :100 balance at 1st year ??? (30) loss at 2 year 50 profit year

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