Accounting Cycle
Explain the Meaning of Each of the Following

question 47

Essay

Accounting cycle
Explain the meaning of each of the following journal entries. The first is provided as an example. $$\begin{array} { | l | l | l | } \hline \begin{array} { c } \text { Account } \\\text { debited }\end{array} & \begin{array} { c } \text { Account } \\\text { credited }\end{array} & { \text { Explanation } } \\\hline \text { Cash } & \text { Sales } & \begin{array} { l } \text { Sold goods /} \\\text { services for cash }\end{array} \\\hline \text { Inventory } & \begin{array} { l } \text { Accounts } \\\text { payable }\end{array} & \\\hline \begin{array} { l } \text { Accounts } \\\text { receivable }\end{array} & \text { Cash } & \\\hline \text { Land } & \begin{array} { l } \text { Capital } \\\text { stock }\end{array} & \\\hline \begin{array} { l } \text { Interest } \\\text { payable }\end{array} & \begin{array} { l } \text { Interest } \\\text { expense } \end{array} & \\\hline\end{array}$$

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Definitions:

Equity Method

An accounting technique used by a company to record its investment in another company when it has significant influence but does not have full control over that company.

Fair Value

An estimate of the price at which an asset or liability could be traded in an orderly transaction between market participants at the measurement date.