Accounting Equation

A corporation's quarterly __________ will cause a reduction in the corporation's retained earnings, which in turn reduces the corporation's stockholders' equity. However, this will not reduce the corporation's net income.

dividends

The company receives cash from a bank loan.

liability increase assets increase

A corporation's net income is eventually recorded in the following stockholders' equity account: __________.

retained earnings

The accounting equation should remain in balance because every transaction affects how many accounts?

two or more

Which of the following will cause owner's equity to increase?

revenue

Company X provides consulting services to Client Q in May. Company X bills Client Q in May for the agreed upon amount of $5,000. The sales invoice shows that the amount will be due in June. In May, Company X records the transaction by a debit to Accounts Receivable for $5,000 and a credit to Service Revenues for $5,000. What is the effect of this entry upon the accounting equation for Company X?

asset increase equity increase

What is the effect on Client Q's accounting equation in June when Client Q remits the $5,000? Also, which accounts will be involved?

assets (cash) increase liability (acc. payable) decrease

The owner withdraws cash from the business for personal use.

assets decrease equity decrease

The company repays the bank that had lent money to the company.

assets decrease liabilities decrease

The company purchases equipment with its cash.

assets increase assets decrease

The company purchases land by paying half in cash and signing a note payable for the other half.

assets increase assets decrease liability increase

The owner invests personal cash in the business.

assets increase equity increase

The company purchases a significant amount of supplies on credit.

assets increase liabilities increase

The owner contributes his/her personal truck to the business.

assets increase equity increase

The financial statement with a structure that is similar to the accounting equation is the __________.

balance sheet

The basic accounting equation is Assets = Liabilities + __________.

equity

What is the effect on Client Q's accounting equation in May when Client Q records the transaction as a debit to Consultant Expense for $5,000 and a credit to Accounts Payable for $5,000?

equity decrease (expenses decrease equity) assets decrease liability increase

The financial statement that reports the portion of change in owner's equity resulting from revenues and expenses during a specified time interval is the __________.

income statement

Which of the following will cause owner's equity to decrease?

net loss

In June, Company X receives the $5,000. What is the effect on the accounting equation and which accounts are affected at Company X?

no accounts are affected