chapter 1

Given that Jacob's Chocolates Company had beginning retained earnings of $4,000; net income during the period of $10,000; and dividends of $300 calculate the ending balance in the retained earnings account.

((retained earnings + net income) - dividends) = $13,700

Sheldon Company had beginning retained earnings of $1,000, net income of $5,000, and dividends of $250. The ending balance in the retained earnings account is

((retained earnings + net income) - dividends)= $5,750

the correct definition of an asset

An asset is a resource that a business owns or controls

How does the accounting equation apply to businesses?

The equation applies to all transactions and events. The equation states that assets= liabilities + equity. The relation of assets, liabilities, and equity is reflected in the equation. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners.

which of the following statements about balance sheets is correct?

The statement reports the equality of the accounting equation at any point in time. The statement reports the financial position of a company at a point in time. The statement reports assets, liabilities, and equity at a point in time.

T or F? Dividends are resources paid to the stockholders.

True!

why is accounting important?

We live in an information age in which accounting information impacts us all

define an asset

an amount owed, resources controlled by the business, and resources with expected future benefits

accounts that would only appear on a balance sheet

common stock, equipment, accounts payable

the process of analyzing data to identify meaningful relations and trends is called

data analytics

a graphical presentation of data to help in understanding their significance is

data visualization

Smith Company purchased $100 of supplies for her business and paid immediately. She would record this transaction in the accounting equation by which of the following?

decrease cash and increase supplies

these affect equity

dividends, common stock, revenues, and expenses

an external user of accounting information

does not directly run the organization

these appear on a balance sheet

equipment, supplies, accounts payable, retained earnings, and cash

the ________________ is the first financial statement to be prepared

income statement

Sally Smith decided to start a sea shell business organized as a corporation. Her initial investment in the business consisted of $10,000 in cash in exchange for common stock. Record this transaction in the accounting equation of the new business by:

increasing cash and increasing common stock

Examples of external users

lenders, shareholders, governments, consumer groups, external auditors, customers

Examples of internal users

purchasing managers, human resource managers, production managers, distribution managers, marketing managers, service managers, research and development managers

What is the rule about entering transactions into the accounting equation?

the accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity