Accounting 1. Chapter 1
Total assets are $19,500.00. Cash is paid for $1,500.00 of supplies. The total assets are now ____.
$19,500.00
Total assets are $22,000.00. Supplies are bought on account for $1,500.00. The total assets are now ____.
$23,500.00
A business has total cash of $30,000.00. Then the business pays $1,000.00 on account, buys insurance coverage of $750.00, buys supplies for $1,200.00, and pays $300.00 more on account. The balance of the cash account is now
$26,750.00
A business has total assets of $30,000.00. Then the business pays $1,000.00 on account, buys insurance coverage of $750.00, buys supplies for $1,200.00, and pays $300.00 more on account. Total assets are now ____.
$28,700.00
To start a business, the owner invested $8,000.00, bought $1,500.00 of supplies, insurance coverage of $500.00, and bought an additional $300.00 of supplies on account. Total assets are ____.
$8,300.00
transaction
A business activity that changes assets, liabilities, or owner's equity
Proprietorship
A business owned by one person
accounting system
A planned process for providing financial information that will be useful to management
sale on account
A sale for which cash will be received at a later date
liability
An amount owed by a business
revenue
An increase in owner's equity resulting from the operation of a business
asset
Anything of value that is owned
Accounting Equation
Assets = Liabilities + Owner's Equity
The accounting equation is most often stated as ____.
Assets = Liabilities + Owner's Equity
Recording and reporting a business's financial information separately from the owner's financial information is an application of the accounting concept ____.
Business Entity
The capital account is a liability account.
FALSE
A decrease in owner's equity because of a withdrawal is a result of the normal operations of a business.
False
A revenue transaction decreases the sum of the balances on the left side of an accounting equation.
False
A withdrawal is an expense.
False
Anything of value that is owned is a liability.
False
Asset accounts are listed on the right side of the accounting equation.
False
If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance.
False
Revenue from a sale on account should be recorded when the payment is received.
False
Revenue is a decrease in owner's equity resulting from the operation of a business.
False
The accounting equation does not have to be in balance to be correct.
False
The accounting equation is most often stated as: Assets+Liabilities=Owner's Equity
False
The capital account is the owner's liability account
False
The sum of the assets and liabilities of a business always equals the investment of the business owner.
False
When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage.
False
When an account on one side of the accounting equation is increased, there must also be an increase on the other side to keep the equation in balance.
False
When an owner invests cash in a business, owner's equity decreases.
False
When cash is paid for expenses, the business has less cash; therefore, the asset account Cash is decreased and the owner's equity account is increased.
False
When cash is paid for supplies, assets increase and liabilities decrease.
False
When cash is paid on account, a liability is increased.
False
Financial Statements
Financial reports that summarize the financial condition and operations of a business
Equities
Financial rights to the assets of a business
The amount remaining after the value of all liabilities is subtracted from the value of all assets is ____.
Owner's Equity
Business Ethics
The use of ethics in making business decisions
A business has two types of equities.
True
A business that performs an activity for a fee is a service business.
True
A proprietorship is also known as a sole proprietorship.
True
A record summarizing all the information pertaining to a single item in the accounting equation is an account.
True
A transaction for the sale of goods or services results in an increase in owner's equity.
True
A transaction is a normal business activity that changes assets, liabilities, or owner's equity.
True
A transaction that increases accounts receivable and increases owner's equity is a sale on account.
True
Accounting is the language of business.
True
After each transaction, the accounting equation must remain in balance.
True
Asset accounts are listed on the left side of the accounting equation
True
Assets have value because they can be used to acquire other assets or to operate the business.
True
Assets such as cash and supplies have value because they can be used to acquire other assets or to operate a business.
True
In the United States, business transactions are recorded in U.S. dollars.
True
Individuals or other businesses to which a business owes money have rights to the business's assets.
True
Keeping personal and business records separate is an application of the business entity concept.
True
Regardless of when payment is made when services are sold, the revenue should be recorded at the time of the sale
True
The accounting equation must be in balance to be correct.
True
The amount in an account is an account balance.
True
The capital account is an owner's equity account.
True
The relationship among assets, liabilities, and owner's equity can be written as an equation.
True
When a company makes a sale of $300.00, assets and owner's equity increase by $300.00.
True
When financial records for a business and for its owner's personal belongings are not mixed, this is an application of the Business Entity accounting concept.
True
When items are bought and paid for at a future date, another way to state this is to say these items are bought on account.
True
When two asset accounts are changed in a transaction, there must be an increase and a decrease.
True
Withdrawals are assets taken out of a business for the owner's personal use.
True
service business
a business that performs an activity for a fee
Buying items and paying for them at a future date is ____.
a common business practice
expense
a decrease in owner's equity resulting from the operation of a business
When supplies are bought on account, the business to whom money is owed is ____.
a liability account
account
a record summarizing all the information pertaining to a single item in the accounting equation
Prepaid Insurance is ____.
an asset account
A decrease in owner's equity resulting from the operation of a business is ____.
an expense
When a transaction changes both sides of the accounting equation, ____.
an increase on the left side must equal an increase on the right side
When a business pays cash for supplies, ____.
assets increase and assets decrease
The account used to summarize the owner's equity in a business is ____.
capital
The asset most commonly withdrawn by business owners is ____.
cash
When a transaction changes only one side of the equation, if one account is increased, the other account on the same side must ____.
decrease
When a business pays cash for insurance, a liability is increased.
false
When a business buys supplies on account, assets ____.
increase
If cash is increased by $2,000.00 when the owner invests cash in the business, then capital is ____.
increased by $2,000.00
When cash is decreased and supplies are increased by an equal amount, ____.
liabilities and capital are not changed
A transaction that increases cash and decreases owner's equity is ____.
none of the above
When cash is paid on account, ____.
one asset and one liability are changed
accounting records
organized summaries of a business's financial activities
Accounting
planning, recording, analyzing, and interpreting financial information
A transaction that increases accounts receivable and increases owner's equity is ____.
revenue
Cash is increased by ____.
revenue
Capital
the account used to summarize the owner's equity in a business
account balance
the amount in an account
Owner's Equity
the amount remaining after the value of all liabilities is subtracted from the value of all assets
account title
the name given to an account
In the United States, recording business transactions in dollars is an application of the accounting concept ____.
unit of measurement