Accounting I

Owner's Equity Equation

(Capital In - Withdrawals) + (Revenue - Expenses)

The 5 accounts affected by each and every transaction

- Assets - Liabilities - Capital/Withdrawals - Revenue - Expenses

Revenue, Sales or Income

Businesses make their money by selling goods or services, which is called either:

Asset

Cash is considered to be:

Cr

Credit is expressed as ____.

Dr

Debit is expressed as _____.

True

Debits always come first in accounting (T/F)

True

Decreases in owner's equity caused by withdrawals are debited to a Withdrawals account. (T/F)

Credits

Decreases to Assets and Expenses are Credits

Debits

Decreases to Liabilities, Capital and Revenue are

Capital

John Smith gives his business $10,000.00 from his own personal funds. Which of the following accounts does this transaction affect? Liabilities Expenses Withdrawal Revenue Capital

Withdrawal

John Smith takes $5,000.00 back from his business to repay himself some of the money he loaned to his business. Which account would be affected: Withdrawal Revenue Expenses Liabilities Accounts Payable

Withdrawals

Money that the owner takes back out of the business, or monies that the owners pay themselves back from the business, (sometimes this account is referred to as the Drawing Account)

account payables

Monies that you or your business owe to another are called:

False

Owner's Equity is comprised of Assets + Liabilities + Revenue - Expenses (T/F)

Gross Profit Calculation

Revenue - Cost of Goods Sold

Gross Profit

Revenue after deducting costs is called:

True

The basic accounting equation is: Assets = Liabilities + Owner's Equity (T/F)

6,000.00 Dr.

The cash account has a Debit Balance of $10,000.00 and a Credit Balance of $4,000.00. The account balance is:

Debit

The cash account should have a ____________account balance

Expenses

The costs of doing business are termed:

account balance

The difference between an account's debits and credits is called:

False

The expanded accounting equation is: Assets = Liabilities + Owner's Equity (T/F)

pencil foot each account

The first step in preparing a trial balance is to:

Debit Side

The left side of a standard T account is

Credit

The revenue account should have a _______ account balance

double entry

The term given to recording an entry when one debit and one credit are affected is called:

Expenses

This account should have a Debit balance associated with it: Expenses Liabilities Revenue Capital

Trial Balance

This statement proves the equality of debits to credits:

We took in cash of $500.00, so our cash account increased, and we sold merchandise valued at $500.00. So, our revenue account also increased. Our cash increased so we record the transaction by Debiting Cash $500.00. Our revenue increased so we record the transaction by Crediting Revenue $500.00.

We sold $500.00 worth of goods to a customer and the customer paid cash for the merchandise. What transpired in this transaction?

NET LOSS

When expenses exceed revenue

NET PROFIT

When revenue exceeds expenses

we increased revenue

When the revenue account is credited that means:

Expenses

Which account below should NOT have a credit balance? Revenue Capital Liabilities Account Payables Expenses

Cash

Which of the following accounts is NOT a part of Owner's Equity: Revenue Cash Capital Expenses Withdrawals

Mortgage Payable

Which of the following is an account payable: Postage Mortgage Payable Wages Revenue Fees Account Receivables

Accounts payable

Which of the following is an example of a liability: Revenue Postage costs Accounts payable Sales Capital

Liabilities

Which of the following is not factored into computing Owner's Equity: Revenue Gross profit Expenses Liabilities

Left = Debits Right =Credits

Which side is debit and which is credit on a T diagram?

Expenses

are the costs associated with doing business. are incurred in order for a business to either attract new business, increase revenue, or simply to do business. For example, advertising, rent.

Liabilities

debts that are owed to another for goods and/or services received or used but not yet paid for. Examples are mortgages, car loans, Accounts Payable.

Owner's Equity

how much a business is worth in dollar value. Owner's Equity is comprised of Revenue, minus expenses plus capital. equates to ownership, i.e. how much worth or value something that you posses actually has.

Capital

the money invested into the business by the owner using his or her own funds.

Revenue

the money that your business takes in from the sale of goods or services rendered. Monies earned by services are termed fees. Lawyers and doctors earn fees, while merchandising businesses earn revenues (income).

Assets

those things that a business owns or posses that are worth a specific dollar value. Examples include automobiles, cash, Account Receivables, furniture and fixtures.

$2500

A firm has $17,500.00 in liabilities and $20,000.00 in assets. In order to compute the Basic Accounting Equation, what must Owner's Equity be?

Assets

Account receivables are:

the difference between an accounts debits and credits

An account balance is:

Equity

Another name for ownership

Expanded Accounting Equation

Assets = Liabilities + Capital In - Withdrawals + Revenue - Expenses

Basic Accounting Equation

Assets = Liabilities + Owner's Equity

The two accounts affected are Cash and Capital Debit Cash $5,000. Credit Capital $5,000.

Example: You have loaned your business $5,000.00

False

Expenses increase owner's equity. (T/F)

liabilities, revenue and capital

From the following select the group whose accounts should have a Credit balance associated with them: liabilities, revenue and expenses cash, expenses and capital cash, revenue and liabilities liabilities, revenue and capital liabilities, revenue, capital and cash

Cash, withdrawals and expenses

From the following select the group whose accounts should have a Debit balance associated with them: Cash, Revenue and capital Cash, expenses and capital Cash, withdrawals and expenses Withdrawals ,expenses and revenue Liabilities, cash and expenses

Net Profit (or Net Loss) Calculation

Gross Profit - Expenses

Net profit

Gross profit minus expenses equals:

the cash account has money in it

If the cash account has a debit balance that means:

Debits

Increases to Assets and Expenses are

Credits

Increases to Liabilities, Capital and Revenue are

Debits

Increases to cash are recorded as: