Classify each of the following items as owner's drawing, revenue, or expense.
(a) Advertising expense
(b) Commission revenue
(c) Insurance expense
(d) Salaries Expense
(e) Bergman, Drawing
(f) Rent revenue
(g) Utilities expense
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To classify each item as owner's drawing, revenue, or expense, you need to understand the basic accounting concepts.
1. Owner's Drawing: This refers to the amount of money or assets that the owner of a business withdraws for personal use. It is considered a decrease in the owner's equity in the business.
2. Revenue: Revenue is the income generated by the business from its primary activities. It increases the owner's equity in the business.
3. Expense: Expenses are the costs incurred by a business in order to generate revenue. They decrease the owner's equity in the business.
Now, let's classify each of the items:
(a) Advertising expense: This is an expense incurred by the business to promote its products or services. Expense.
(b) Commission revenue: This represents the income earned by the business from commissions earned on sales or services. Revenue.
(c) Insurance expense: This refers to the cost of insurance coverage for the business. Expense.
(d) Salaries expense: This is the cost incurred by the business to pay salaries to its employees. Expense.
(e) Bergman, Drawing: This refers to drawings made by the owner, indicating personal withdrawals from business funds. Owner's Drawing.
(f) Rent revenue: This represents the income earned by the business from renting out property or assets. Revenue.
(g) Utilities expense: This refers to the cost incurred by the business for utility services such as electricity, water, or gas. Expense.
By understanding the basic concepts of owner's drawing, revenue, and expense, you can classify each item based on their nature and effect on the owner's equity in the business.