Accounting 1A Ch. 1

Assets and liabilities of a company are $150,000 and $30,000, respectively. Determine owner's equity using the accounting equation.

$120,000. Assets = Liabilities + Owner's Equity ($150,000 = $30,000 + $120,000)

Given the following information, determine fees earned. Wages expense equals $4,400; supplies expense equals $2,900; and miscellaneous expense equals $1,250. Net income equals $5,100

$13,650. Revenues minus expenses equals net income

Cool Taste Company recorded $5,000 in sales on account for the week. What effect does this transaction have on the accounting equation?

$5,000 increase in assets and $5,000 increase in owner's equity. The asset, Accounts Receivable. will increase by $5,000, and owner's equity, Revenue, will increase by $5,000

Which of the follow users is not considered an external user of accounting information?

A manager. Managers are considered internal users of accounting information

__________ sell products purchased from other businesses.

Merchandising. Merchandising businesses sell products that they purchase from other businesses to customers

Money earned by a business for selling goods or services to its customers represents what?

Revenues. Money earned by a business for selling goods or services to its customers represents revenues

Accounting Equation

The accounting equation is Assets = Liabilities + Owner's Equity

Rights of a business assets

The rights of stock holders comes before the rights of creditors

The numerator in the calculation of the ratio of liabilities to owner's equity is

Total Liabilities. The numerator in the calculation of the ratio of liabilities to owner's equity is Total Liabilities

Included on the balance sheet are

assets, liabilities, and owner's equity

All business transactions can be stated in terms of

changes in the elements of the accounting equation. All business transactions can be stated in terms of changes in the elements of the accounting equation

The statement that reports net income or loss for a certain period in time is the

income statement. The income statement is a summary of revenues and expenses for a specific period of time, such as a month or a year. If expenses are greater than revenues, a net loss will be reported

Cool Taste Company purchased $1,500 of supplies with cash. What effect does this transaction have on the accounting equation?

no overall effect on the components of the accounting equation. An asset (Supplies) will increase by $1,500, and an offsetting decrease will occur in an asset (Cash) for $1,500

The ratio of liabilities to owner's equity is a tool used to assess a company's ability to

pay its creditors. The ratio of liabilities to owner's equity is useful in analyzing the ability of a company to pay its creditors

Paying an amount on account reduces what?

the amount owed on a liability. Paying an amount on account reduces the amount owed on a liability

Corporations refer to total owner's equity as

total stockholders' equity. Corporations refer to total owner's equity as total stockholders' equity