Accounting I
Owner's Equity Equation
(Capital In - Withdrawals) + (Revenue - Expenses)
The 5 accounts affected by each and every transaction
- Assets - Liabilities - Capital/Withdrawals - Revenue - Expenses
Revenue, Sales or Income
Businesses make their money by selling goods or services, which is called either:
Asset
Cash is considered to be:
Cr
Credit is expressed as ____.
Dr
Debit is expressed as _____.
True
Debits always come first in accounting (T/F)
True
Decreases in owner's equity caused by withdrawals are debited to a Withdrawals account. (T/F)
Credits
Decreases to Assets and Expenses are Credits
Debits
Decreases to Liabilities, Capital and Revenue are
Capital
John Smith gives his business $10,000.00 from his own personal funds. Which of the following accounts does this transaction affect? Liabilities Expenses Withdrawal Revenue Capital
Withdrawal
John Smith takes $5,000.00 back from his business to repay himself some of the money he loaned to his business. Which account would be affected: Withdrawal Revenue Expenses Liabilities Accounts Payable
Withdrawals
Money that the owner takes back out of the business, or monies that the owners pay themselves back from the business, (sometimes this account is referred to as the Drawing Account)
account payables
Monies that you or your business owe to another are called:
False
Owner's Equity is comprised of Assets + Liabilities + Revenue - Expenses (T/F)
Gross Profit Calculation
Revenue - Cost of Goods Sold
Gross Profit
Revenue after deducting costs is called:
True
The basic accounting equation is: Assets = Liabilities + Owner's Equity (T/F)
6,000.00 Dr.
The cash account has a Debit Balance of $10,000.00 and a Credit Balance of $4,000.00. The account balance is:
Debit
The cash account should have a ____________account balance
Expenses
The costs of doing business are termed:
account balance
The difference between an account's debits and credits is called:
False
The expanded accounting equation is: Assets = Liabilities + Owner's Equity (T/F)
pencil foot each account
The first step in preparing a trial balance is to:
Debit Side
The left side of a standard T account is
Credit
The revenue account should have a _______ account balance
double entry
The term given to recording an entry when one debit and one credit are affected is called:
Expenses
This account should have a Debit balance associated with it: Expenses Liabilities Revenue Capital
Trial Balance
This statement proves the equality of debits to credits:
We took in cash of $500.00, so our cash account increased, and we sold merchandise valued at $500.00. So, our revenue account also increased. Our cash increased so we record the transaction by Debiting Cash $500.00. Our revenue increased so we record the transaction by Crediting Revenue $500.00.
We sold $500.00 worth of goods to a customer and the customer paid cash for the merchandise. What transpired in this transaction?
NET LOSS
When expenses exceed revenue
NET PROFIT
When revenue exceeds expenses
we increased revenue
When the revenue account is credited that means:
Expenses
Which account below should NOT have a credit balance? Revenue Capital Liabilities Account Payables Expenses
Cash
Which of the following accounts is NOT a part of Owner's Equity: Revenue Cash Capital Expenses Withdrawals
Mortgage Payable
Which of the following is an account payable: Postage Mortgage Payable Wages Revenue Fees Account Receivables
Accounts payable
Which of the following is an example of a liability: Revenue Postage costs Accounts payable Sales Capital
Liabilities
Which of the following is not factored into computing Owner's Equity: Revenue Gross profit Expenses Liabilities
Left = Debits Right =Credits
Which side is debit and which is credit on a T diagram?
Expenses
are the costs associated with doing business. are incurred in order for a business to either attract new business, increase revenue, or simply to do business. For example, advertising, rent.
Liabilities
debts that are owed to another for goods and/or services received or used but not yet paid for. Examples are mortgages, car loans, Accounts Payable.
Owner's Equity
how much a business is worth in dollar value. Owner's Equity is comprised of Revenue, minus expenses plus capital. equates to ownership, i.e. how much worth or value something that you posses actually has.
Capital
the money invested into the business by the owner using his or her own funds.
Revenue
the money that your business takes in from the sale of goods or services rendered. Monies earned by services are termed fees. Lawyers and doctors earn fees, while merchandising businesses earn revenues (income).
Assets
those things that a business owns or posses that are worth a specific dollar value. Examples include automobiles, cash, Account Receivables, furniture and fixtures.
$2500
A firm has $17,500.00 in liabilities and $20,000.00 in assets. In order to compute the Basic Accounting Equation, what must Owner's Equity be?
Assets
Account receivables are:
the difference between an accounts debits and credits
An account balance is:
Equity
Another name for ownership
Expanded Accounting Equation
Assets = Liabilities + Capital In - Withdrawals + Revenue - Expenses
Basic Accounting Equation
Assets = Liabilities + Owner's Equity
The two accounts affected are Cash and Capital Debit Cash $5,000. Credit Capital $5,000.
Example: You have loaned your business $5,000.00
False
Expenses increase owner's equity. (T/F)
liabilities, revenue and capital
From the following select the group whose accounts should have a Credit balance associated with them: liabilities, revenue and expenses cash, expenses and capital cash, revenue and liabilities liabilities, revenue and capital liabilities, revenue, capital and cash
Cash, withdrawals and expenses
From the following select the group whose accounts should have a Debit balance associated with them: Cash, Revenue and capital Cash, expenses and capital Cash, withdrawals and expenses Withdrawals ,expenses and revenue Liabilities, cash and expenses
Net Profit (or Net Loss) Calculation
Gross Profit - Expenses
Net profit
Gross profit minus expenses equals:
the cash account has money in it
If the cash account has a debit balance that means:
Debits
Increases to Assets and Expenses are
Credits
Increases to Liabilities, Capital and Revenue are
Debits
Increases to cash are recorded as: