The Accounting Equation

Assets are $270,000 and owner's equity is $90,000. Liabilities will be __________.

$180,000

Doug John is the owner and operator of John's Janitorial Services. At the end of its accounting period, December 31, John's Janitorial Services has assets of $500,000 and liabilities of $275,000. Using the accounting equation, what is the owner's equity?

$225,000

Widget Incorporated provided the following financial statement elements and their respective balances for the year-end December 31, 20X5. Their accounting software failed before they could produce their financial statements, but the General Ledger for the year was printed. Determine how much the total liabilities of the company were as of December 31, 20X5.

$53,220 (everything that said payable)

Michael Monroe purchased $3,960 worth of equipment from one of his suppliers in January, on account. The increase in the equipment asset was recognized when purchased in January. When Michael makes the payment to the supplier in March, what will be the impact on the accounting equation?

A decrease to the cash asset and a decrease to the accounts payable liability

Sam's Lawn Service incurred $500 labor expense and promised to pay the labor agency within 30 days. Which account increased?

Accounts payable

Sam's Lawn Service earned $1,000 for services rendered. The customer promised to pay at a later time. Which of the following accounts increased?

Accounts receivable

Steve's Supply Service received $1,000 cash from a customer which was owed to the business from the previous month. Which of the following accounts decreases?

Accounts receivable

Liability

An obligation that a company or organization owes to others.

The accounting equation is __________ and it is applicable in which financial statement?

Assets = Liabilities + Owner's Equity/Balance Sheet

To analyze the effect of a business transaction on the accounting equation, one must do all of the following except __________.

Carry forward the current balance of affected accounts

Joshua Ford paid $1,450 for the monthly office rent. This transaction affects the accounting equation by __________________.

Decreasing the cash asset and decreasing owner's equity through expenses

Faith West has a consulting business. She received $10,000 in cash from a client for services rendered. The effect of this transaction on the accounting equation is __________.

Increase assets and increase owner's equity

David Thomas purchased office furniture for his business. He paid for this furniture with cash. This transaction would ______________.

Increase the furniture asset and decrease the cash asset

is whatever remains after deducting liabilities from assets.

Owner's equity

Assets

Something of value that a company or organization owns or a future benefit to the company.

Which of the following business transactions would affect the liability account?

Supplies are purchased, on account

Which financial statement reports profitability (net income or loss) of operations?

The Income Statement

A business receives a bill for services rendered from one of its suppliers. The business will pay the bill when it is due, next month. When the business receives the bill from its supplier, how does this affect the accounting equation?

The accounts payable liability increases, and owner's equity decreases through expenses

A business performs services for its customers, on account. Payment for services rendered is due in 30 days from the date of service. When services are performed, how does this affect the accounting equation?

The accounts receivable asset increases and owner's equity increases through revenue

A business settles a liability by making a payment with cash. How does paying this liability affect the accounting equation?

The cash asset decreases, and the accounts payable liability decreases

Owner's Equity

The difference between assets and liabilities; belongs to a company's owners.

The left side of a T-account is called __________ and the right side of a T-account is called ___________, and the normal balance side of an account is______________.

debit/credit/the side that is increased