Accounting - A New Hope

Accounting Equation

100

The fundamental accounting equation

Assets = Liabilities + Equity

200

What happens to assets and liabilities if a company borrows $5,000 from a bank?

Assets increase, Liabilities increase

300

If a company issues $10,000 in common stock, which parts of the accounting equation increase?

Assets and Equity

400

A company pays $2,000 cash for rent. How does this affect the accounting equation?

Assets decrease, Equity decreases

500

Total Assets: $145,000 Total Equity $50000 Total Liabilities ????

$95,000

Account Classifications

100

Cash

Asset

200

Accounts Payable

Liability

300

Inventory

Asset

400

Common Stock

Owners Equity

500

A monthly utility bill would be what type of account?

Expense

Effects of Transactions & Normal Balances

100

What is the normal balance of an asset account?

Debit

200

What is the normal balance of a liability account?

Credit

300

Paying cash to a supplier for a previous purchase affects which accounts and how?

Assets decrease, Liabilities decrease

400

Earning revenue on account affects which accounts and how?

Assets increase, Equity (Revenue) increases

500

Paying salaries affects which accounts and how?

Assets decrease, Equity (Expense) decreases

Alphabet Soup

100

GAAP stands for?

Generally Accepted Accounting Principles

200

Which basis of accounting recognizes revenue when earned, not when cash is received?

Accrual

300

What is the role of the FASB?

Establish / write accounting standards

400

2+ owners, share profits & risks, liability usually unlimited

Partnership

500

What is the role of the SEC?

Oversee the financial reporting of publicly traded companies. Enforce GAAP

Accounts and Transactions

100

Paid $600 for last month’s utilities. Which two accounts are affected?

Cash (Asset) decreases and Utilities Expense (Equity) increases

200

The company pays $1,500 for this month’s rent in cash. Which two accounts are affected?

Cash (Asset) decreases and Rent Expense (Equity) increases

300

Purchased $2,000 of office supplies on account. Which two accounts are affected?

Supplies (Asset) increases and Accounts Payable (Liability) increases

400

Provided $3,500 of services to a customer on account. Which two accounts are affected?

• Accounts Receivable (Asset) increases and Service Revenue (Equity) increases

500

Collected $1,000 from a customer previously billed. Which two accounts are affected?

Cash (Asset) increases and Accounts Receivable (Asset) decreases