Accounting 211: Chapter 1

Which statements below define a liability?

-A creditor's claims against the assets of a business -The company obligations to provide assets, products, or services to others -An amount owed to a creditor

Identify the correct definitions of an asset

An asset is something of value that a business owns or controls

When supplies are purchased on credit it means that:

-the business will pay for the supplies at a later time. -a liability has been incurred. -the Accounts Payable account will be increased.

Dividends of $60 cash are paid to the corporation's stockholders. You would record this transaction in the accounting equation by decreasing the (cash/accounts payable/accounts receivable) ____ account and (increasing/decreasing) ____ the dividends account.

cash/increasing

Net income is calculated using the following formula: ____ (expenses/revenues/assets) - ____ (expenses/revenues/assets) = net income

revenues/expenses

When recording transactions into the accounting equation, which of the following statements are correct?

-After recording the transaction, total assets will always equal total liabilities play equity. -The accounting equation must always remain in balance -At least two acccounts will be affected when recording a transaction.

Given the accounts below, choose all of the ones that affect equity.

-Dividends -Revenues -Expenses -Common stock

Johna's Plant Nursery Company pays the salaries of its two employees. How will this transaction affect the accounting equation?

-Equity will be decreased -Salaries expense will be increased

The definition of expenses includes which of the following statements?

-Expenses are the costs necessary to earn revenue -Expenses decrease equity

Which of the following statements is/are true regarding the effect of revenues on the equity of a business?

-Revenues that increase equity have many forms, such as consulting services and rental revenue -Revenues cause equity to increase

Given the following list of accounts, identify which are classified as liabilities.

-Wages Payable -Notes Payable -Accounts Payable -Taxes Payable

From the following statements, identify the correct definition of a liability.

A company's obligation to provide assets, products or service to others.

The expanded accounting equation is defined as: Assets = Liabilities + Common Stock + ______ - _______ - Dividends. Do not include "account" or "accounts" in your answer.

Assets/Revenues/Expenses

Select the account that would be decreased if Hillary's Hair Salon decides to pay $40 cash dividends to its shareholders.

Cash

Given the following lists of accounts, choose the one that include only assets

Cash, Building, Supplies, Accounts Receivable

Jackson Company purchased office equipment costing $3,000 for his business and paid immediately. Record this transaction in the accounting equation by:

Decreasing cash; Increasing equipment

From the following statements, select the one that describes the effect of dividends on equity

Dividends cause equity to decrease

When using the accounting equation, recording the purchase of equipment for cash would include an increase to the ____ (Cash/Equipment/Supplies) account and a decrease to the ____ (Cash/Equipment/Supplies) account.

Equipment/Cash

Which of the following statements describes the effect of expenses on equity?

Expenses cause equity to decrease

Owner investments causes a(n) (increase/decrease) ________ in equity.

Increase

Bob's Bakery receives its utility bill of $800 for the month and pays it immediately. Record this transaction in the accounting equation.

Increase expenses and decrease Cash

The correct definition of revenues is: Revenues (increase/decrease) (liabilities/Equity) and are earned from the sale of products and services.

Increase/Equity

If a customer makes a partial payment of $100 on a service for which you have already billed him, you would record this transaction into the accounting equation by:

Increasing Cash and decreasing accounts receivable

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; Increasing Common Stock

Jackson's Catering Company provided cookies worth $3,000 to the local college. The college paid immediately. Records this transaction in Jackson's accounting equation by:

Increasing Cash; Increasing revenues

On May 1, Mary's Morsels Company provided catering services at a wedding. The bride is billed $4,000 and will pay during the following month. Record this transaction on May 1 in the accounting equation of Mary's Morsels by:

Increasing accounts receivable and increasing revenue

Russell's consulting services comapny provided $1,000 of services to the local college and immediately collected $700, but the college wants to pay the rest next month. Record this transaction in the accounting equation for Russell's consulting service by:

Increasing both cash and accounts receivable; and increasing revenues.

Given the statements below, choose the most accurate definition of dividends.

Outflow of resources to stockholders

Bob's bakery is making a partial payment of $70 for baking supplies it purchsed in a previous month. Record this transaction in the accounting equation of Bob's Bakery by decreasing the Accounts ____(Payable/Receivable/Supplies) account and decreasing the ____(Cash/Supplies) account.

Payable/Cash

To record the purchase of supplies for cash, the correct entry into the accounting equation would include to increase (Equipment/Supplies/Cash) ______ and a decrease to (Equipment/Supplies/Cash) _____.

Supplies/Cash

Which of the statements correctly represents the accounting equation?

What a business owns will always equal what it owes to creditors and owners.

On 6/25, supplies costing $1,000 were purchased, but only $400 of this amount was paid on 6/25. The remainder of the bill went on account. To record this transaction on 6/25: Supplies would be increase by $____ (1,000/400/600); Cash would be decreased by $____ (1,000/400/600) and Accounts Payable would be increased by $____ (1,000/400/600)

1,000/400/600