Chapter 1 - Accounting in Business!

Total assets of Martin Marine equal $500,000 and its liabilities and equity amounts are equal to each other. What is the amount of its liabilities? What is the amount of its equity? (balance it out)

$250,000

Total assets of Charter Company equal $700,000 and its equity is $420,000. What is the amount of its liabilities?

$280,000

Use the accounting equation to compute the missing financial statement amounts (a), (b), and (c). Accounting equations (Assets equal Liabilities plus Equity) for three companies: Company 1: $75,000 equals A plus $40,000 Company 2: B equals $25,000 plus $70,000 Company 3: $85,000 equals $20,000 plus C

A(Liabilities). 35,000 B(Assets). 95,000 C(Equity). 65,000

Use the expanded accounting equation to compute the missing financial statement amounts (a) Expanded accounting equations for two companies: Company 1: Assets $40,000; Liabilities $16,000; Owner, Capital $20,000; Owner, Withdrawals $0; Revenues (a); Expenses $8,000

A(Revenues). 12,000

_____________ is the recording of transactions and events, either manually or electronically. A. Bookkeeping B. Recording C. Identifying D. Language of Business

A. Bookkeeping

______________ requires that we input, measure, and log transactions and events. A. Recording B. Accounting C. Communicating D. Language of Business

A. Recording

Is this an Accounting Principle, Assumption or Constraint? Full Disclosure

Accounting Principle

Is this an Accounting Principle, Assumption or Constraint? Revenue recognition

Accounting Principle

Transaction 1: Investment by Owner Taylor(Owner) invests $30,000 cash in the new company in exchange for its common stock, and deposits the cash in a bank account opened under the name of FastFowward. Where do you report this in the accounting equation?

Assets / Cash +$30,000 . = Liabilities / Blank + Equity / Common Stock +$30,000

What is the accounting equation?

Assets = Liabilities + Equity

Is this an Accounting Principle, Assumption or Constraint? Going-Concern

Assumption

Is this an Accounting Principle, Assumption or Constraint? Time Period

Assumption

_________________ helps accountants by performing repetitive tasks such as entering invoice data. A. Accounting B. Artificial intelligence C. Bookkeeping D. Communicating

B. Artificial Intelligence

Identify the accounting principle or assumption that best reflects this situation. Alfonso owns Consulting LLC. Alfonso keeps personal expenses separate from LLC expenses

Business entity assumption

What is the accounting principle or assumption that best explains this situation? Mike Derr owns both Sailing Passions and Dockside Digs. In preparing financial statements for Dockside Digs, Mike makes sure that the expense transactions of Sailing Passions are kept separate from Dockside Digs's transactions and financial statements.

Business entity assumption

What is an example of a Internal user?

CEO, Managers, Controllers,

Recommend a business entity type in this situation. An entrepreneur is deciding between partnership and a corporation. Two goals are the ability to add many investors by selling shares of ownership and a business with an indefinite life.

Corporation

What equals equity?

Equity= Assets - Liabilities

Recommend a business entity type in this situation. An entrepreneur is deciding between a sole proprietorship and an LLC. Two goals are to pay no additional business income tax and to have limited liability

LLC

What is the accounting principle or assumption that best explains this situation? If $51,000 cash is paid to buy land, the land is reported on the buyer's balance sheet at $51,000

Measurement Principle (Cost Principle)

Identify the accounting principle or assumption that best reflects this situation. Ming Studios purchases camera equipment for $12,000 cash. The owner thinks the equipment is worth $18,000. The equipment is recorded at $12,000.

Measurement principle (Cost Principle)

What is the risk factor (Opportunity, Pressure, or Rationalization) of this situation? No one matches the cash in the register to receipts when shifts wend.

Opportunity

What is the risk factor (Opportunity, Pressure, or Rationalization) of this situation? The business has no cameras or security devices at its warehouse.

Opportunity

What is Internal User?

Persons who are directly involved in the company

What is a External User?

Persons who are not directly involved in the company

What is the risk factor (Opportunity, Pressure, or Rationalization) of this situation? Managers are expected to grow business or be fired

Pressure

What is the risk factor (Opportunity, Pressure, or Rationalization) of this situation? Officers are told to report rising income or risk layoffs.

Pressure

What is the risk factor (Opportunity, Pressure, or Rationalization) of this situation? A worker sees other employees regularly take inventory for personal use.

Rationalization

Identify the accounting principle or assumption that best reflects this situation. AAA Painting performs services for a customer this period. AAA records revenue for this period even though the customer is not billed until next period

Revenue recognition principle

What is an example of a External user?

Suppliers, Lenders, IRS, Shareholders, Customers, Regulators

What is equity?

The owners' claim to assets.

What are assets?

resources owned by a business

What are liabilities?

what a company owes