Accounting Chapter 2

At the end of the first month of operations for Jackson's Catering Service, the business had the following accounts: Cash, $19,000; Prepaid Rent, $500; Equipment, $5,000 and Accounts Payable $2,000. By the end of the month, Jackson's had earned $20,000 of Revenues, $1,000 of Utilities Expenses and $1,500 of Salaries Expenses. Calculate the net income to be reported by the company for this first month.

$17,500

If during the year total assets increase by $75,000 and total liabilities decrease by $16,000, by how much did owner's equity increase/decrease?

91000 increase

Given the options below, identify the correct accounting equation formula.

Assets = Liabilities + Owner's Equity

The statement of financial position is another term for which financial statement?

Balance Sheet

Which financial statement is a representation of the accounting equation?

Balance Sheet

Which financial statement is reported as of a specific date?

Balance Sheet

A company has assets of $56,320 and liabilities of $29,500. The owner's equity is $85,820.

False

If assets are $8,000 and liabilities are $2,000, owner's equity is $10,000.

False

The expenses for a period are reported on the balance sheet.

False

Choose the option below that reflects the correct order in which to prepare the three financial statements

Income Statement; Statement of Owner's Equity; Balance Sheet.

If a business issued a check for $1,000 to pay for two months rent in advance, analyze the effect on the firms' assets, liabilities and owner's equity.

Prepaid Rent will increase

If a business issues a check for $100 to purchase office supplies, analyze the effect on the accounting equation.

Total Property will remain the same

A business transaction is a financial event that affects the resources of a business.

True

A double line drawn under the figures in a money column shows that the computation is complete.

True

Al Dunn Bakery bought a new oven for $1,380. Al paid $300 as a cash down payment and will pay the balance in 30 days. Total assets increased by $1,080.

True

The amount of net income or net loss is needed to complete the statement of owner's equity.

True

The income statement is also known as the profit and loss statement.

True

An expense by definition is not:

an amount a business must pay in the future.

The rent paid for future months is a(n)

asset.

When the owner invests cash in a business,

assets and owner's equity increase.

When the owner writes a company check to pay the firm's electric bill,

assets decrease and expenses increase.

If a business receives $5,000 on account from clients who owed money for services previously billed, identify the effect on the accounting equation

assets remain the same and owner's equity remains the same

The owner's investment or equity in a business is called

capital.

Examples of assets are:

cash and accounts receivable.

The Balance Sheet heading includes each of the following except:

firm's address.

Ginger Yale Ice Company receives money from a customer on account. Recording this transaction will

increase Cash

The balance sheet shows each of the following except the:

net income of the business.

When equipment is purchased for cash,

one asset increases and another asset decreases.

When using the fundamental accounting equation, an accountant must make sure that total assets are always equal to total liabilities and owner's equity.

true

A net loss results

when expenses are greater than revenue.