Chapter 2

The first step in analyzing the effect of a business transaction is

Describe the financial event Reason: The first step is to describe the financial event.

Mitra Ankur Assoc. purchased equipment on account from Carefree Equipment Inc. for $500. This transaction would increase the equipment account and increase the ______________ account.

accounts payable

An owner's financial interest in the business is called equity, or

capital

The income statement shows the results of the business operation for a specific period of time. When revenue is greater than expenses for the period, the result is called

net income

The statement of owner's equity reports the changes that occurred in the owner's financial interest during the reporting period. Place the following parts of the statement of owner's equity in the correct order that it would be reported: Position 1 of 4 Capital, January 1, 20X1 correct toggle button unavailable Capital, January 1, 20X1

1. capital beg of period 2. Net income 3. withdrawals 4 capital end of period

Phoebe's Child Care Co. has assets of $10,000 and liabilities of $7,000. Phoebe's owner's equity must equal:

3k

Sometime Company makes purchases on account. One type of liability that a business must pay in the future is known as

AP

Bill Jones Tree Trimming bills his clients for his services. Bill's customers are allowed 30 days to pay. Amounts owed by these clients are known as

AR

Companies sometimes sell services to customers on account. These amounts owed by customers are known as ____________.

AR

During July, Brad's Bookkeeping Services billed clients a total of $14,000 for services provided during the month. During August, Brad received $10,000 cash from these customers. The receipts in August would increase cash and decrease

AR

Davarshi Delivery Co. owns three delivery vehicles, and a small building and land where the vehicles are stored. These items are known as Devarshi Delivery Co.'s

Assets

The statement of owner's equity reports the changes that occurred in the owner's financial interest during the reporting period. Identify which of the following items are reported on the statement of owner's equity:

Beginning Capital balance Withdrawals Net income

A financial event, such as a purchase or sale, that changes the resources of a firm is known as a

Blank 1: business Blank 2: transaction

Sana Gill deposited $3,500 into a new business checking account to begin her new bookkeeping firm, Gill Bookkeeping. This business transaction would (increase/decrease) __________the company's cash, and (increase/decrease) ________Sana Gill, Capital.

Blank 1: increase Blank 2: increase

Jorge Hernandez opened a consulting business by depositing $15,000 into a business checking account in the name of Hernandez Consulting. This business transaction would increase:

Cash and Capital

Guzman Consulting Company paid $4,000 cash for a computer for the office. This transaction would decrease

Cash, equipment

An owner's financial interest in the business is called capital or

Equity

Amounts earned from the sale of goods or services is called

Revenue

True or false: Amounts earned from the sale of goods or services is called revenue.

Revenue

Miguel Guzman Co. purchased office equipment on account for $750. Analyze this transaction and identify which of the following sections of the accounting equation would increase:

accounts payable + office equipment

Property or equipment owned by a business are known as

assets

The financial statement that reports a business's financial condition on a certain date, including its assets, liabilities, and owner's equity is called a(n):

balance sheet

Finn's Consulting Co. provided services to a client and collected $300 cash. This transaction would increase cash and increase ____________.

consulting revenue

Sana Bookkeeping received $1,400 cash from clients who owed money for services previously billed. The effect of this transaction would increase cash and:

decrease accounts receivable

Larson Consulting Company issued a $2,500 check to purchase a copier for the company's office. Analyze this transaction and identify which of the following accounts would increase:

equipment

The costs of any materials, labor, supplies, and services used to produce revenue is called a(n)

expense

The costs that a business incurs in order to operate are called ___________.

expenses

The income statement shows the results of business operations for a specific period of time. This statement shows details of the following categories (select all that apply):

expenses + revenue

Assets = liabilities + owner's equity is known as the:

fundamental accounting equation

The first step in analyzing a business transaction is to describe the financial event. Place the following financial event analysis steps in the correct order.

identify the property identify who owns the property determine the amount + or -

The financial statement that shows the results of a business operation for a specific period of time, and details revenues and expenses during this time, is called the _____________.

income statement

Sana Gill deposited $3,500 into a new business checking account to begin her new bookkeeping firm, Gill Bookkeeping. This business transaction would----- , the company's cash, and -----increase , Sana Gill, Capital.

increase + increase

Moira's Oil Change Co. provides quick oil changes. During the week, Moira received $3,675 cash for services provided to customers. Which parts of the accounting equation would be affected by these receipts?

increase cash+ increase revenues

The balance sheet reports a business's financial condition on a certain date. Identify which of the following items are found on a balance sheet:

liabilities owner's equity assets

On the income statement, when expenses are greater than revenue, the result is called a:

net loss

The income statement shows the results of business operations for a specific period of time. When expenses are greater than revenue, this is called

net loss

An owner's financial interest in the business is called capital or

owner's equity

Sometime Company makes purchases on account from a commonly used supplier. These amounts that a business must pay to the supplier in the future are called accounts

payable

Examples of business transactions include:

purchases and payments