Practice Ch. 1 Accounting

Given that Jacob's Chocolates had owner investments of $4,000; net income during the period of $10,000; and owner withdrawals of $300 calculate the ending balance in the Owner's Capital account.

$13700

Sheldon Company had owner investments of $1,000; net income during the period of $5,000; and owner withdrawals of $250. The ending balance in the Owner's Capital account is

$5750

The (blank) recognition principle states that revenue is recognized when goods or services are provided to customers and at an amount expected to be received.

(Revenue) recognition principle.

An internal user of accounting information is: (Check all that apply.)

1. A human resource manager. 2. A user who is directly involved in managing and operating an organization. 3. A marketing manager.

Which of the statement(s) below define(s) an asset? (Check all that apply.)

1. A resource owned 2. Resources controlled by the business 3. Resources with future benefits

When recording transactions into the accounting equation, which of the following statements are correct? (Check all that apply.)

1. After recording the transaction, total assets will always equal total liabilities plus owner's equity. 2. The accounting equation must always remain in balance.

The definition of expenses includes which of the following statements? (Check all that apply.)

1. Expenses decrease equity. 2. Expenses are the costs necessary to earn revenue.

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

1. Increase 2. Equity

The three factors that must exist for a person to commit fraud include (blank), (blank), and (blank).

1. Opportunity. 2. Financial Pressure. 3. Rationalization.

Identify internal users of accounting information from the choices below. (Check all that apply.)

1. Purchasing Managers. 2. Marketing Managers.

Generally accepted accounting principles (GAAP) wants information to have: Check all that apply.

1. Relevance. 2. Faithful Representation.

The definition of revenues includes which of the following statements? (Check all that apply.)

1. Revenues increase equity. 2. Revenues are the sales of products or services to customers by a business.

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

1. Supplies. 2. Cash.

Which of the following statements explain(s) how the accounting equation applies to businesses? Check all that apply

1. 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. 2. The equation applies to all business transactions. 3. The equation states that Assets = Liabilities + Equity. 4. The relation of assets, liabilities and equity is reflected in the equation.

The four general accounting principles include: (Check all that apply).

1. expense recognition 2. measurement 3. revenue recognition 4. full disclosure

When supplies are purchased on credit it means that: (Check all that apply.)

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

Identify what accounting is by selecting the correct statement.

Accounting is a system that identifies, records and communicates finnacial information.

Why does a business need accounting information?

Accounting records business transactions and communicates financial information.

Identify the correct definition of an asset.

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

Which of the following correctly depicts the accounting equation?

Assets = Liabilities + Equity

Given the statements below, choose the most accurate definition of owner withdrawals.

Assets an owner takes from the business for personal use

Each of the financial statements on the left are described on the right. Identify the description that goes with each financial statement. Instructions

Balance Sheet - Reports the balance of assets, liabilities and owner's equity at a point in time Income Statement - Reports the revenues and expenses incurred by a business for a period of time Statement of Owners Equity - Reports the changes in equity during a period of time Statement of Cash Flows - Identifies the cash inflows and outflows over a period of time

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 increased 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).

Blank 1: 1,000 Blank 2: 400 Blank 3: 600

Given the statements below, choose the most accurate definition of owner investments.

Cash or other assets an owner puts into the business

Sally Smith 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; increase Supplies.

Match each item on the left with its correct definition on the right.

Expenses - Decrease equity and are the cost of providing products and services to customers. Revenues - increase equity from sales of products and services to customers. Owner Withdrwals - Decrease equity and are the outflows of assets from the company for the owner's personal use. Owner Investments - Increase equity and are assets an owner puts into the business.

A(n) _____ user of accounting information does not directly run the organization.

External

Users who do not directly run the organization and have limited access to accounting information are called , (internal/external) users.

External, users.

True or false: An external user uses internal reports for their decision making needs.

False.

Jack Pickle decided to start a small business. His initial investment was $4,000. Demonstrate how to record this transaction in the accounting equation

Increase Cash by $4,000; Increase J. Pickle, Capital by $4,000

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

Increase Equipment Decrease Cash

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.

On 8/1, supplies costing $500 were purchased on credit. Record this transaction in the accounting equation by:

Increasing Supplies, and increasing Accounts Payable

Users of accounting information can be divided into two main groups. These groups include:

Internal and External

Buying and selling of long-term assets such as land and equipment would be included in the (operating/investing/financing) (blank) activities section of the Statement of Cash Flows.

Investing

The three sections of the statement of cash flows includes all of the following:

Investing Financing Operating

The accounts payable account is a(n) ______ account.

Liability.

An employee that has unpaid bills might exhibit the following fraud factor:

Pressure.

Define what the income statement reports by completing the following sentence: The income statement describes a company's (blank) (assets/revenues) and (blank) (expenses/liabilities) along with the resulting net income or loss over a period of time due to earnings related activities.

Revenues Expenses

Which of the following statements below lists the rules of 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.

What are Generally Accepted Accounting Principles?

The concepts and rules that govern financial accounting practice.

The correct definition of an income statement includes which of the following?

The statement describes a business's revenues and expenses over a period of time.

Which of the following statements best represents the reason for the accounting equation?

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

True or false: By definition, owner investments are cash or other assets that an owner or owners contributes to the company.

True

True or false: Owner withdrawals are resources taken from the business for personal use.

True

Which of the statements correctly represents the accounting equation?

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

Jackson's Programming paid its June rent of $500 cash. Demonstrate how to use the accounting equation to record the transaction by completing the following sentence. Jackson would decrease (expenses/cash/revenues) (blank) and increase (expenses/equity/revenues) (blank) in the accounting equation.

decrease Cash increase Expenses

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

decreasing Cash; increasing Equipment

Jackson's Catering Services sold cookies to the local college. The college paid immediately. Record this transaction in Jackson's accounting equation by:

increasing Cash; increasing Revenues

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

increasing Cash; increasing S. Smith, Capital.

Russell's Consulting Services 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.