Accounting Equation
Liabilities equal $500,000 and equity equals $100,000. This is the total amount of assets that the company must have.
What is $600,000?
Assets = Liabilities + Equity
Assets = $500,000 + $100,000
Assets = $600,000
This accounting assumption requires a business's financial activities and records to be kept separate from those of its owners.
What is the Separate Entity Assumption?
On October 1,Reyes Plumbing Company provided $295 of plumbing services to a customer on credit. This is the journal entry for the transaction.
What is:
Debit Accounts Receivable $295
Credit Plumbing Services Revenue $295
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A ledger account includes a balance column that is updated after each journal entry is posted by taking debits minus these.
What are credits?
Assets equal $60,000 and equity equals $25,000. This is the total amount of liabilities that the company must have.
What is $35,000?
Assets = Liabilities + Equity
$60,000 = Liabilities+ $25,000
-$25,000 from both sides
Liabilities = $35,000
This accounting principle requires that all goods and services be recorded at cost.
What is the measurement principle?
On November 15, Reyes Company paid salaries to their employees of $1,250 for the current pay period. This is the journal entry to reflect that transaction.
What is:
Debit Salaries Expense $1,250
Credit Cash $1,250
Salaries Payable appears on this financial statement.
What is the balance sheet?
Identify the impact on the accounting equation:
The company purchases office supplies on credit.
Hint: two part answer
What is increases an asset & a liability?
This accounting constraint allows businesses to bypass certain accounting standards for immaterial items.
What is the materiality constraint?
On June 14, Reyes Company received their telephone bill for $130 and sent a check for payment. This is the journal entry for the transaction.
What is:
Debit Telephone Expense $130
Credit Cash $130
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Revenues and Expenses appear on this financial statement.
What is the Income Statement?
Identify the impact on the accounting equation:
The company purchases a company car for cash.
What is increases an asset & decreases an asset?
This accounting principle stipulates that expenses must be recorded in the same accounting period as the revenues they help generate.
What is the Matching Principle (or Expense Recognition Principle)?
On July 3, Reyes company paid Office Depot $140 for Office Supplies. This is the journal entry to reflect that transaction.
What is:
Office Supplies $140
Cash $140
?
This is the net income to be reported on the Income Statement for the month of August based on the information below:
Cash $10,000
Supplies $5,000
Equipment $30,000
Salaries Payable $10,000
Consulting Revenue $26,000
Rent Revenue $3,000
Salaries Expense $7,000
Supplies Expense $1,000
Owner, Capital $13,800
Owner, Withdrawals $200
What is $21,000?
Total Revenues $29,000 ($26,000 + $3,000)
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Total Expenses $8,000 ($7,000 + $1,000)
Determine the amount of equity that the company has based on the following account balances:
Cash $50,000
Supplies $5,000
Land $125,000
Accounts Receivable $10,000
Accounts Payable $50,000
What is $140,000?
Assets = Liabilities + Equity
Assets: Cash $50,000 + Supplies $5,000 + Land $125,000 + A/R $10,000 =
Liabilities: A/P $50,000
$190,000 = $50,000 + Equity
-$50,000 on each side
$140,000 = Equity
These are the first four steps in the accounting process.
What is:
1) Identify transactions from Source Documents
2) Analyze Transactions Using the Accounting Equation
3) Journalize Transactions
4) Post Journal Entry to the General Ledger
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On October 15, Reyes Company received a payment of $200 towards previously billed plumbing services. This is the journal entry to record the transaction.
What is:
Debit Cash $200
Credit Accounts Receivable $200
?
The four financial statements are prepared in this order.
1) Income Statement
2) Statement of Owners' Equity
3) Balance Sheet
4) Statement of Cash Flows