The Accounting Equation
What is the Accounting Equation?
Assets = Liabilities + Owner's Equity
True or False: Information in a journal includes the debit and credit parts of each transaction recorded in one place
True
Assets, liabilities, and owner’s equity are included on which financial statement
Balance Sheet
Petty Cash is classified as a(n)
Asset
When does the Accounting Equation have to be balanced?
At all times?
Journalize the following transaction:
Paid $100 cash for supplies
Supplies 100
Cash 100
Revenues and Expenses are included on which financial statement
Income Statement
What is the most liquid asset?
Cash
The values of all things owned (assets) are on which side of the accounting equation
The Left Side
Journalize the following transaction:
Paid $500 cash to owner as a withdrawal of equity
Cash 500
Which statement shows the financial position of a business at a specific point in time?
Balance Sheet
Accounting is known as the language of _____
Business
If a company has assets of $150,000 and liabilities of $90,000, what is the owner's equity?
$60,000
(150,000 = 90,000 + x)
Mar 1 Cash 1,000
Owner's Capital 1,000
What happened on March 1?
The owner invested $1,000 into the business
If expenses are greater than revenue, the company has a net ____
Loss
Adjusting Entries: Which two accounts are affected when making the adjustment for Supplies?
Supplies Expense (Debit)
Supplies (Credit)
If an asset increases by $200, what is one way to keep in the Accounting Equation in balance?
- Decrease another asset by $200
- Increase liabilities by $200
- Increase owner's equity by $200
How do you correct a journal entry if there are already multiple entries below the incorrect entry?
Draw a line through the incorrect entry and write the correct information above it
The rule of the Balance Sheet is that Total Assets must equal what?
Total Liabilities & Owner's Equity
When preparing a chart of accounts, what number do the following account classifications start with?
Assets
Expenses
Liabilities
Owner's Equity
Revenue
Assets - 1
Expenses - 5
Liabilities - 2
Owner's Equity - 3
Revenue - 4