Assets
Cash, supplies, and equipment are examples of what?
Assets
What is money owed to someone called?
Liabilities
Owner’s Equity represents what?
The owner’s claim on the assets of the business
State the basic accounting equation.
Assets = Liabilities + Owner’s Equity
What is the list of a business’s Assets, Liabilities, and Owner’s Equity at a point in time?
Net Worth Statement
Which asset decreases when a business pays rent with cash?
Cash
A business buys supplies on account. Which liability increases?
Accounts Payable
What happens to Owner’s Equity when the owner invests cash?
Owner’s Equity increases
If Assets are $10,000 and Liabilities are $4,000, what is Owner’s Equity?
$6,000
What is the term for when a business owes money to a supplier?
Accounts Payable
A company buys a delivery truck for $20,000. What type of asset is this?
Equipment
If a business owes $2,000 but pays only $500, how much liability remains?
$1,500
What happens to Owner’s Equity when the owner withdraws money for personal use?
Owner’s Equity decreases
A business buys $2,000 of supplies on account. Which parts of the equation change?
Assets ↑ $2,000, Liabilities ↑ $2,000
What is the term for money owed to the business by customers?
Accounts Receivable
If a business provides services on account, which asset increases?
Accounts Receivable
A business owes $1,000 in Accounts Payable. It pays $600 to the creditor but also buys another $400 of supplies on account. What is the new Accounts Payable balance?
$800 ($1,000 – $600 + $400)
Revenue has what effect on Owner’s Equity?
Increases Owner’s Equity
A business earns $1,000 revenue in cash. How does the equation change?
Assets ↑ $1,000, Owner’s Equity ↑ $1,000
What is the term for money earned by a business for providing services?
Revenue
A business buys office supplies for $1,000 cash. How does this affect total assets?
Total assets stay the same (Supplies ↑ $1,000, Cash ↓ $1,000).
A business pays $500 toward its Accounts Payable but also purchases $700 of new supplies on account. By how much do Liabilities increase or decrease overall?
Answer: Net increase of $200 ($700 increase – $500 decrease).
Expenses have what effect on Owner’s Equity?
Decreases Owner’s Equity
A business pays $500 cash for expenses. How does the equation change?
Assets ↓ $500, Owner’s Equity ↓ $500
What is the term for the costs of doing business that decrease Owner’s Equity?
Expenses