To discover where a specific transaction such as a check or a deposit will show in your books and financial statements, go to the appropriate transaction journal and find the entry in the sequential list of transactions. It is important to understand these categories. Liabilities -Those amounts that your business owes to third parties. Capital - The investments of the owners and the accumulation of profits or losses for the business since it began. Income - The sources from which the business earns its money.
Income is measured for a period of time.
Cost of Sales - The cost of the product sold by a business and the related costs of having the product available to sell. In some instances service-technician labor is included in cost of sales along with the product sold. Cost of sales is measured for a period of time. The daily expenses incurred in running your business. They are the rent, advertising, insurance, etc.