Accounting Equation, Assets, Liabilities, Equity, Financial Statements Week 1 – Practice
The key terms included in this Accounting course include applying the Accounting Equation, Assets, Charter Company, Liabilities, Equity, Financial Statements, Income and Equity Accounts, Principles, Assumptions and Constraints, Journal Entries, T-Accounts, Transactions.
Applying the accounting equation
a. Total assets of Charter Company equal $790,000 and its equity is $465,000. What is the amount of its liabilities?
b. Total assets of Martin Marine equal $590,000 and its liabilities and equity amounts are equal to each other. What is the amount of its liabilities? What is the amount of its equity?
Assets | = | Liabilities | + | Equity | |
a | 790,000 | = | 325,000 | + | 465,000 |
b | 590,000 | = | 295,000 | + | 295,000 |
Identifying items with financial statements
Indicate in which financial statement(s) each item would most likely appear, by selecting income statement (I), balance sheet (B), statement of retained earnings (E), or cash from operating activities (CF) from the drop down provided.
a. | Haircutting revenue | I |
b. | Commission revenue | I |
c. | Cash from operating activities | CF |
d. | Rental revenue | I |
e. | Trucks | B |
f. | Rent expense | I |
g. | Buildings | B |
h. | Net decrease (or increase) in cash | CF |
i. | Factory | B |
Identifying income and equity accounts
Identify each of the following items as revenues, expenses, or dividends from the drop down provided.
1. | Sales revenue | Revenue |
2. | Conveyane | Expenses |
3. | Fees earned | Revenues |
4. | Postage | Expenses |
5. | Advertisement | Expenses |
6. | Salaries | Expenses |
7. | Interest paid | Expenses |
8. | Owner withdrawal | Dividends |
Identifying assets, liabilities, and equity
Identify each of the following items as assets, liabilities, or equity from the drop down provided.
1. | Accounts Receivable | Assets |
2. | Wages payable | Liabilities |
3. | Supplies | Assetss |
4. | Equipment | Assets |
5. | Note payable | Liabilities |
6. | Furniture | Assets |
Identifying principles, assumptions and constraints
Identify the following terms/phrases as either an accounting: (a) principle, (b) assumption, or (c) constraint.
1. | Expense recognition | principle |
2. | Full disclosure | principle |
3. | Business entity | assumptions |
4. | Benefit exceeds cost | constraint |
Accounting Equation – Financial Accounting Fundamentals
Identifying financial statement accounts
Classify each of the following accounts as an asset (A), liability (L), or equity (EQ) account.
a. | Office Equipment | A |
b. | Dividends | EQ |
c. | Common Stock | EQ |
d. | Prepaid Insurance | A |
e. | Office Supplies | A |
f. | Prepaid Rent | A |
g. | Cash | A |
h. | Unearned Rent | L |
i. | Accounts Payable | L |
Reading a chart of accounts
A chart of accounts is a list of all ledger accounts and an identification number for each. Identify the following accounts as either an asset (A), liability (L), equity (EQ), revenue (R), or expense (E) account.
a. | Notes Payable | L |
b. | Interest Earned | R |
c. | Common Stock | E |
d. | Accounts Payable | L |
e. | Rent Revenue | R |
f. | Supplies Expense | E |
g. | Postage Expense | E |
h. | Patents | A |
i. | Rent Receivable | A |
Identifying normal balance
Identify the normal balance (debit or credit) for each of the following accounts.
Normal Ending Balance | ||
a. | Dividends | Debit |
b. | Unearned Revenue | Credit |
c. | Common Stock | Credit |
d. | Accounts Receivable | Debit |
e. | Janitorial Expense | Debit |
f. | Equipment | Debit |
g. | Office Supplies | Debit |
h. | Unearned Ticket Revenue | Credit |
i. | Office Equipment | Debit |
Linking debit or credit with normal balance
Indicate whether a debit or credit decreases the normal balance of each of the following accounts.
Decrease Normal Balance | ||
a. | Cash | Credit |
b. | Accounts Receivable | Credit |
c. | Note Receivable | Credit |
d. | Prepaid Insurance | Credit |
e. | Prepaid Rent | Credit |
f. | Service Fees Earned | Debit |
g. | Prepaid Parking | Credit |
h. | Supplies | Credit |
i. | Interest Revenue | Debit |
j. | Store Equipment | Credit |
k. | Office Supplies | Credit |
l. | Salaries Payable | Debit |
Analyzing transactions and preparing journal entries
For each transaction, (1) analyze the transaction using the accounting equation, (2) record the transaction in journal entry form, and (3) post the entry using T-accounts to represent ledger accounts. Use the following (partial) chart of accounts—account numbers in parentheses: Cash (101); Accounts Receivable (106); Office Supplies (124); Trucks (153); Equipment (167); Accounts Payable (201); Unearned Landscaping Revenue (236); Common Stock (307); Dividends (319); Landscaping Revenue (403); Wages Expense (601), and Landscaping Expense (696).
- On May 15, DeShawn Tyler opens a landscaping company called Elegant Lawns by investing $88,000 in cash along with equipment having a $48,000 value in exchange for common stock.
- On May 21, Elegant Lawns purchases office supplies on credit for $640.
- a. On May 25, Elegant Lawns receives $9,600 cash for performing landscaping services.
- On May 30, Elegant Lawns receives $2,800 cash in advance of providing landscaping services to a customer.
Complete this question by entering your answers in the tabs below.
For each of the above transaction, analyze the transaction using the accounting equation. (Enter total amounts only.)
Assets | = | Liabilities | + | Equity | |
a. | $136,000 | = | $0 | + | $136,000 |
b. | $640 | = | $640 | + | $0 |
c. | $9,600 | = | $0 | + | $9,600 |
d. | $2,800 | = | $2,800 | + | $0 |
For each of the above transaction, record the transaction in journal entry form. Use the following (partial) chart of accounts—account numbers in parentheses: Cash (101); Accounts Receivable (106); Office Supplies (124); Trucks (153); Equipment (167); Accounts Payable (201); Unearned Landscaping Revenue (236); Common Stock (307); Dividends (319); Landscaping Revenue (403); Wages Expense (601), and Landscaping Expense (696).
No | Date | General Journal | Debit | Credit |
1 | May 15 | Cash | 88,000 | |
Equipment | 48,000 | |||
Common Stock | 136,000 | |||
2 | May 21 | Office supplies | 640 | |
Accounts payable | 640 | |||
3 | May 25 | Cash | 9,600 | |
Landscaping revenue | 9,600 | |||
4 | May 30 | Cash | 2,800 | |
Unearned landscaping revenue | 2,800 |
Post the entry using T-accounts to represent ledger accounts. (TIP: For right side T-account entries you must use a right side date selection. For left side T-account entries you must use a left side date selection.)
Cash 101 Office Supplies 124 | |||||||
Date Amount Date Amount Date Amount | Date Amount | ||||||
May 15 88,000 May 21 640 | |||||||
May 25 9,600 | |||||||
May 30 2,800 | |||||||
End. bal. 100,400 End. bal 640 | . | ||||||
Equipment 167 Accounts Payable 201 | |||||||
Date Amount Date Amount Date Amount | Date Amount | ||||||
May 15 48,000 | May 21 640 | ||||||
End. bal. 48,000 End. bal. | 640 | ||||||
Unearned Landscaping Revenue 236 | Common Stock 307 | ||||||
Date Amount Date Amount | Date Amount Date Amount | ||||||
May 30 2,800 | May 15 136,000 | ||||||
End. bal. 2,800 | End. bal 136,000 | ||||||
Landscaping Revenue 403 | |||||||
Date Amount Date Amount | |||||||
May 25 9,600 | |||||||
End. bal. 9,600 |
Analyze
Analyzing debit or credit by account
Identify whether a debit or credit results in the indicated change for each of the following accounts.
a. | To increase Furniture | Debit |
b. | To decrease Equipment | Credit |
c. | To increase Supplies Expense | Debit |
d. | To increase Haircutting Revenue | Credit |
e. | To decrease Taxes Payable | Debit |
f. | To decrease Office Equipment | Credit |
g. | To increase Interest Payable | Credit |
h. | To decrease Store Equipment | Credit |
i. | To increase Common Stock | Credit |
j. | To increase Trucks | Debit |
Determine the ending balance of each of the following T-accounts.
Cash | Accounts Payable | ||||
Beg.Bal. | 270 | 220 | Beg.Bal. | 3,700 | 13,100 |
470 | 230 | 5,900 | |||
190 | |||||
End.Bal. | 480 | 0 | End.Bal. | 0 | 3500 |
Supplies | Accounts Receivable | ||||
Beg.Bal. | 11,700 | 5,500 | Beg.Bal. | 1,450 | 320 |
2,800 | 320 | ||||
320 | |||||
270 | |||||
End.Bal. | 9000 | 0 | End.Bal. | 220 | 0 |
Wages Payable | Cash | ||||
Beg.Bal. | 870 | Beg.Bal. | 16,100 | 6,200 | |
870 | 970 | 7,700 | |||
270 | 3,000 | ||||
End.Bal. | 0 | 0 | End.Bal. | 440 | 0 |