Liabilities and Equity in Accounting -Quickbooks

Dale wants to take out a mortgage to purchase a commercial space to expand his business: "Tailor Swift - Quick Alterations and Embroidery Services". He has found a property, prepared his business proposal, and is going to meet with the bank. He has been working out of his home for years and already has a good client base, lots of equipment, and inventory valued at $50,000 to get his business off the ground in a formal space. If granted a $100,000 mortgage, how would the accounting equation look to keep his books balanced?

$100k increase in liabilities + $0 no change in equity = $100k increase in assets -Recall that the balance equation is Assets = Liabilities + Equity. In this case, both liabilities and assets increase with no change to equity.

A customer purchases a pair of leopard spot fuzzy dice for $30 and the purchase is subject to 8% tax. What's the total amount Crankshaft Customs should collect from the customer? (Format your answer as $xx.xx)

0.08*$30=$2.40 tax $30 + $2.40=$32.40 total due.

The following are current liabilities except:

A note payable is considered a long-term liability. The following are current liabilites: Short-term Loans Payable Compensation and Benefits Deferred Revenue

Seymore Fish takes out vendor credit of $5500 with "Akon Aquatics Custom Tank Supplies" to replace his custom-made fish tanks for "Seymore's Sea Store" where he sells pet fish and small sea creatures. Seymore would credit his line of credit under _______ for $5,500 and debit his _____ for $_______?

Accounts payable and Fixed Asset- Fish Tank; $5,500 Seymore will credit his Line of Credit Payable Account (under "Liabilities") for $5,500 and debit his Fixed Asset-Fish Tank account (under "Assets") for the same amount.

Why is deferred revenue considered a liability?

Because it is technically for goods or services still owed to customers

Why is deferred revenue considered a liability?

Because it is technically for goods or services still owed to customers. -The payment is considered a liability because there is still the possibility that the good or service may not be delivered, or the buyer might cancel the order.

Sal takes out a vendor line of credit of $3,000 for some upgrades to his store. He will then debit ______ for $3,000 and credit his ______ for the same amount.

Cash Account; Accounts Payable

Liabilities have a normal ________________ balance.

Credit

Continuing from question 6, where would Suzanne's payments due in the current year (or the next 12 months) be recorded on the balance sheet?

Current Liabilities

Tosin has a customer who has already paid him to come pressure wash their house next month. Tosin would record this payment as a _______?

Current Liability

Assets have a normal _________ balance.

Debit

When Seymore makes purchases from, but still owes money to "Akon Aquatics Custom Tank Supplies" for the line of credit, he records the $2,000 of purchases in the journal entry by:

Debiting the supplies purchased under the expense named New Tank Supplies for $2,000 and crediting Accounts payable for $2,000

The following are non-current liabilities except:

Deferred revenue is a current liability. the following are non current liabilities: Notes Payable Bonds Payable Deferred Income taxes

True or False: When a business opens a line of credit with a vendor they are able to use that credit anywhere as long as it's in the United States.

False

When a customer gives you an advance payment, you will decrease the deferred revenue account. As you deliver goods or services, your deferred revenue account will increase.

False

True or False: Current Liabilities are only amounts we owe to suppliers (of merchandise or services) bought on credit.

False -Current liabilities cover many other types of liabilities, including taxes owed, interest owed, etc.

Funds in the Sales Tax Payable account can be treated as if they were Sales Revenue.

False -Sales Tax Payable is a liability account. Those funds represent money owed to the tax agency (or agencies). They should not be recorded as revenue.

True or False: A $25,000, five-year note for a trailer that requires a monthly payment of $1,000 should go under the asset section of the balance sheet.

False -Because this is a note payable, this is considered a liability.

In the same state, shoes, bananas, and a haircut would all be subject to the same sales tax rate

False/ It depends -Depending on the state or local tax law, different items may be subject to different rates.

An account with a balance other than what is expected or normal may indicate a(n) __________.

NOT DERERRED TAX AND NOT DERERRED REVENUE. its one of the other 2 answers (error or embezzlement)

Suzanne owns a clothing store in a small beach town called 'Sunny Side Threads'. She wants to expand her brand's influence by using a van she can hang clothes and accessories in for traveling to events along the coast during summer. If Suzanne were to purchase a $45,000 van with a bank loan, paying $12,000 down, at 6.99% over 72 months, where would the loan itself go on the balance sheet?

NOT Liabilities, under short-term NOT Assets, under PP&E. its one of the other two answers (Liabilities, under long-term OR Equity, under investments)

In the case of a company's deferred revenues, which occurs first?

Receiving The Money From The Customer -Deferred revenues indicate that a company has received money from a customer before it has been earned.

Seymore Fish of "Seymore's Sea Store" purchased the glass and special paneling needed to rebuild his fish tanks for $2,000 from "Akon Aquatics Custom Tank Supplies".

Record the purchases as soon as the bill arrives, even though the payments have not yet been made to Akon Aquatics Custom Tank Supplies. -Purchases made on lines of credit, in fact all credit, are recorded as soon as the bill arrives. Even though the payments have not yet been made to the supplier.

Which feature of accounting software can provide information about how much sales tax is owed to each tax agency?

Sales Tax Liability Report

Which account is missing in this journal entry for the $32.40 sale that includes $2.40 in tax?

Sales Tax Payable

When setting up an account to document a line of credit in QuickBooks, you need to:

Set up two separate accounts, one for the principal and an expense account for interest Step 1: Set up an account for the principal. Step 2: Set up an expense account for the interest.

Now, Seymore has used and paid off the $2,000 line of credit he owed to "Akon Aquatics Custom Tank Supplies". This journal entry should:

Seymore should debit accounts payable for $2,000 and credits cash for $2,000. Making the net effect on accounts payable combining both the purchase and the payment is zero.

True or False: Liabilities have a normal credit balance.

TRUE

The claims against a company's assets are known as what?

The claims against a company's assets are known as liabilities.

The expected balance of a particular account type is known as ___________.

The expected balance of a particular account type is known as the normal or natural account balance.

A company's obligations that will come due within one year are known as what?

The obligations that will come due within one year are referred to as Current Liabilities.

A company's obligations that won't come due within one year are known as ________.

The obligations that will not come due within one year are referred to as Non-current Liabilities.

True or False: Bonds Payable are long-term debt securities issued by a company that promises to pay back the principal at some specified point in the future.

True

Deferred Revenues are not considered revenue until the product or service has been provided, thus they are not reported on the income statement.

True -Since deferred revenues are not considered revenue until they are earned, they are not reported on the income statement. Instead, they are reported on the balance sheet as a liability. As the income is earned, the liability is decreased and recognized as income.

Gift card purchases from "Penelope's Punky Pins" would be considered deferred revenue.

True Deferred revenue is money received in advance for products or services that are going to be performed in the future.

When a customer gives you an advance payment

You increase your deferred revenue account. As you deliver goods or services, your deferred revenue account will decrease. -