Ch. 1: Smartbook

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 was on credit. To record this transaction on 6/25: Supplies would be increased by $ _________; Cash would be decreased by $ _________ and Accounts Payable would be increased by $________.

$1,000 $400 $600

Given that Jacob's Chocolates Company had beginning retained earnings of $4,000; net income during the period of $10,000; and dividends of $300 calculate the ending balance in the retained earnings account.

$13,700 (Beginning retained earnings + net income - dividends = ending retained earnings)

Given the list of accounts below, identify which of them would appear on a balance sheet. (Check all that apply.)

- Accounts Payable - Supplies - Cash - Equipment - Retained earnings, 12/31

All of the following are part of the FASB conceptual framework: (Select all that apply).

- Elements - Objectives - Qualitative characteristics - Recognition and measurement

Johna's Plant Nursery Company pays the salaries of its two employees. How will this transaction affect the accounting equation? (Check all that apply).

- Equity will be decreased. - Salaries expense will be increased.

A corporation's equity has two main parts. Identify these two parts.

- Retained earnings - Contributed capital

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

- The accounting equation must always remain in balance. - After recording the transaction, total assets will always equal total liabilities plus equity.

When supplies are purchased on credit it means that:

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

Why does a business need accounting information?

Accounting records business transactions and communicates financial information.

Identify the expanded accounting equation from the options below.

Assets = Liabilities + Common Stock - Dividends + Revenues - Expenses

Which of the following correctly depicts the accounting equation?

Assets = Liabilities + Equity

Which list of accounts below, identifies only accounts that would appear on a balance sheet.

Common Stock, Equipment, Accounts Payable

From the following statements, select the one that describes the effect of dividends on equity.

Dividends cause equity to decrease.

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation.

Increase Cash by $4,000; Increase Common Stock by $4,000.

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.

Which statement below defines why accounting information is useful?

It identifies, records, and communicates business transactions.

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

Pressure

Melton's Door Company pays rent on the building facilities of $5,000 on May 1. Show how to record this transaction in the accounting equation of Melton's Door Company.

Rent Expense will be increased.

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.

Which of the statements correctly represents the accounting equation?

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

The expanded accounting equation is defined as: _______ = Liabilities + Common Stock + __________ - __________ - Dividends

assets revenues expenses

Dividends cause a _____________ in equity and are recorded directly in the ____________ account

decrease dividends

When using the accounting equation, recording the purchase of equipment for cash would include an increase to the ____________ account and a decrease to the _______ account

equipment cash

A company pays monthly office rent of $1,500 in cash. Demonstrate how to use the accounting equation to record the transaction by completing the following sentence: The company would increase _________ and __________ __________.

expenses decrease assets

Users who do not directly run the organization and have limited access to accounting information are known as _________ users

external

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

increasing Cash; increasing Common Stock

Jackson's Catering Company provided cookies worth $3,000 to the local college. The college paid immediately. Record this transaction in Jackson's accounting equation by:

increasing Cash; increasing Revenues

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

internal and external

The _____ principle states that accounting information is based on actual cost.

measurement

The FASB conceptual framework consists of all of the following except:

quantitative

Artificial intelligence includes:

repetitive tasks

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

supplies cash

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

- investing - operating - financing

The three factors that must exist for a person to commit fraud include

- opportunity - pressure - rationalization

Net income is calculated using the following formula: _________ - __________ = Net income.

- revenues -expenses

To record the purchase of supplies for cash, the correct entry into the accounting equation would include an increase to __________ and a decrease to __________.

- supplies - cash

Identify which of the following lists of accounts would belong on the statement of retained earnings.

Retained earnings and Dividends

Buying and selling of long-term assets such as land and equipment would be included in ______________ activities section of the Statement of Cash Flows.

investing

The Accounts Payable account is a(n) ______ account.

liability

Smith Company 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.

Equity is composed of contributed capital and _________

retained earnings

True or false: Artificial intelligence includes repetitive tasks such as recording basic transactions.

T

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

increasing Equipment; decreasing 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

Russell's Consulting Services Company 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

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

- faithful representation - relevance