The Accounting Equation
If a business has $50,000$50,000 in assets and $30,000$30,000 in liabilities, this is the amount of owner's equity.
$20,000
Accounts Payable belong to this major financial statement classification.
Liabilities
Owner invested $20,000 cash in the business. What 2 accounts are affected?
Owner invested $30,000 cash to start the business. What 2 accounts are affected?
Cash and Owner's Capital
The Fundamental formula that forms the foundation of double-entry bookkeeping
What is A= L+OE?
This term describes what happens to the accounting equation if every transaction is recorded correctly.
What is staying in balance?
While expenses decrease owner's equity by consuming resources, this specific equity account decreases owner's equity because the owner is taking cash or assets out for personal use.
Owner's Drawings
Purchased $1,200 of equipment with cash. What 2 accounts are affected?
Cash and Equipment
Paid $300 cash toward Accounts. What 2 accounts are affected?
Account Payable and Cash
The owner invested $10,000 of personal cash into the business checking account. What 2 accounts are affected?
Cash and Owner's Capital
If owner's equity increases while liabilities remain constant, this must happen to total assets.
Total Assets must increase by the same amount.
Machinery is a long-term assets held for business operations rather than resale. What specific subcategory of assets do these belong to?
Equipment
Performed $1,500 of services for immediate cash. What 2 accounts are affected?
Cash and Revenue
Bought $400 of office supplies on account. What 2 accounts are affected?
Supplies and Accounts Payable
Purchased $800 of office supplies on account. What 2 accounts are affected?
Supplies and Accounts Payable
If a business has $120,000 in total assets and $45,000 in owner's equity, calculate the total liabilities.
$75,000
Accounts Receivable, Prepaid Insurance, and Inventory are examples of this primary account type.
Assets
Received $350 cash from a customer paying on their account. What 2 accounts are affected?
Cash and Account Receivable
Paid $1,800 cash for six months of insurance in advance. What 2 accounts are affected?
Cash and Prepaid Insurance
Received a $400 utility bill for electricity used this month, but will pay it next month. What 2 accounts are affected?
Expense and Accounts Payable
At year-end, a company's accounting equation is out of balance. Total Assets are $200,000, Liabilities are $80,000, and Owner's Equity is recorded as $110,000. By how much, and in which direction, is the equation off?
Off by $10,000
These two temporary account types ultimately determine whether owner's equity increases or decreases through net income/loss.
Revenues and Expenses
Paid $2,400 in advance for six months of rent with cash. What 2 accounts are affected?
Cash and Prepaid Rent
Owner withdrew $400 cash for personal use. What 2 accounts are affected?
Cash and Owner's Drawings
Peformed $1,500 of consulting services on account. What 2 accounts are affected?
Revenue and Accounts Receivable