The Accounting Equation
What is the accounting equation?
Assets = Liabilities + Owner's Equity
Which side of the T-Account are debits always recorded?
Left
Received cash from sales, $8,897.00.
Cash Revenue
DR CR DR CR
$8,897.00 $8,897,00
_______ is the process of recording, maintaining, and reporting an organization's financial transactions and records.
Accounting
A(n) _______ is a debt or obligation owed to any other person or organization, sometimes referred to as a creditor.
Which side of the T-Account are credits always recorded?
Right
Which two account classifications are found on the Income Statement?
Revenue and Expenses
Paid cash for supplies, $400.00
Supplies Cash
Dr Cr Dr Cr
$400.00 $400.00
A sole proprietor is a business owned by one person and the owner has _________ liability.
Unlimited
Kerek Pulaski purchased $402 of equipment from KB materials on account. Which accounts are affected and how?
Equipment increases; Accounts payable increases
What is the normal balance of an asset?
Debit (left side)
Your manager asks you to look up last year's Net Loss. In which financial statement would you find this information?
Income Statement
Sold services on account to Kat Catty, $458.00.
Accounts Receivable Revenue
Dr Cr. Dr. Cr.
$458.00 $458.00
Which basis of accounting adheres to GAAP? (Cash or Accrual)
Accrual
A business writes a check to pay its employees' wages. How does this affect assets, liabilities, and owners' equity?
What is the normal balance of a liability?
Credit (right side)
Your manager asks you to look up the balance of Prepaid Insurance on 1/31/22. In which financial statement would you find this information?
Balance Sheet
Received cash on account from Kat Catty, $458.00
Cash Accounts Receivable
Dr Cr Dr Cr
$458.00 $458.00
True or False: GAAP is only followed in the United States.
True
A business provides and bills a client for services. How does this affect assets, liabilities, and owners' equity?
Assets increase; Owner's Equity increases
If you use cash to pay down an accounts payable balance, which account is debited and which account is credited?
Debit accounts payable; Credit cash
You pay $500 cash for equipment. How does this affect the balance sheet?
No change in anything!
Paid office rent on account, $1,000.00
Accounts Payable Rent Expense
Dr Cr Dr Cr
$1,000.00 $1,000.00
Henman Company made sales of $350,000 to customers of which it received $200,000 cash from customers. Henman incurred $210,000 in operating expenses of which it paid $160,000 in cash. What was Henman's accrual basis income?
$140,000