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This document contains questions about accounting concepts and terms including assets, liabilities, stockholders' equity, balance sheets, income statements, retained earnings, and the accounting equation. It also includes exercises applying the basic accounting equation to calculate missing values for assets, liabilities, and stockholders' equity based on transaction information provided for various businesses. Finally, it provides a transaction analysis exercise for a company involving the issuance of stock, borrowing, purchases, expenses, and revenues to prepare accounting entries and prove the accounting equation.

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35 views

Questions

This document contains questions about accounting concepts and terms including assets, liabilities, stockholders' equity, balance sheets, income statements, retained earnings, and the accounting equation. It also includes exercises applying the basic accounting equation to calculate missing values for assets, liabilities, and stockholders' equity based on transaction information provided for various businesses. Finally, it provides a transaction analysis exercise for a company involving the issuance of stock, borrowing, purchases, expenses, and revenues to prepare accounting entries and prove the accounting equation.

Uploaded by

Raca Desu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Questions:

➢  Accounting has often been called the language of business. In what respects would
you agree with this description? How might you argue that this description is deficient?
➢  Define asset, liability, and stockholders’ equity.
➢  How do liabilities and stockholders’ equity differ? How are they similar?
➢  How do accounts payable and notes payable differ? How are they similar?
➢  Define revenues. How are revenues measured?
➢  Define expenses. How are expenses measured?
➢  What is a balance sheet? On what aspect of a business does the balance sheet
provide information?
➢  What is an income statement? On what aspect of a business does this statement
provide information?
➢  What information does the statement of retained earnings provide?
➢  Identify the three types of activities shown in a statement of cash flows.
➢  What is a transaction? What use does the accountant make of transactions? Why?
➢  What is the accounting equation? Why must it always balance?
➢  Give an example from your personal life that illustrates your use of accounting
information in reaching a decision.
➢  You have been elected to the governing board of your church. At the first meeting
you attend, mention is made of building a new church. What accounting information
would the board need in deciding whether or not to go ahead?
➢  A company purchased equipment for $ 2,000 cash. The vendor stated that the
equipment was worth $ 2,400. At what amount should the equipment be recorded?
➢  What is meant by money measurement?
➢  Of what significance is the exchange-price (or cost) concept? How is the cost to
acquire an asset determined?
➢  What effect does the going-concern (continuity) concept have on the amounts at
which long-term assets are carried on the balance sheet?
➢  Of what importance is the periodicity (time periods) concept to the preparation of
financial statements?
➢  Describe a transaction that would:
 Increase both an asset and capital stock.
 Increase both an asset and a liability.
 Increase one asset and decrease another asset.
 Decrease both a liability and an asset.
 Increase both an asset and retained earnings.
 Decrease both an asset and retained earnings.
 Increase a liability and decrease retained earnings.
 Decrease both an asset and retained earnings.
 Identify the causes of increases and decreases in stockholders’ equity
B) Accounting Exercises:
Exercise 1. Applying Basic Accounting Equation
Royals Palm, Inc. reports the following assets and liabilities. Compute the totals that
would appear in the corporation’s basic accounting equation (Assets = Liabilities +
Stockholders’ Equity (Capital Stock)).
 
Cash………………………….$55,000
Accounts Payable……………25,000
Office Supplies………………. 1, 500
Loan Payable…………………..7,000
Accounts Receivable………….10,000
Answer:
Assets = Liabilities + Stockholders’ Equity

 
Exercise 2. Applying Basic Accounting Equation
Dan and Den, Inc. reports the following assets and liabilities. Compute the totals that
would appear in the corporation’s basic accounting equation (Assets = Liabilities +
Stockholders’ Equity (Capital Stock)).
 
Cash………………………….$37,000
Accounts Payable……………15,000
Supplies……………………….1, 800
Loan Payable…………………..9,000
Inventory……………………….12,000
 
Answer:
Assets = Liabilities + Stockholders’ Equity

 
Exercise 3. Complete missing amounts in fundamental accounting equation for
several businesses:
Assets = Liabilities + Stockholders’ Equity

578,000 152,000

25,000 180,500

127,000 17,000

269,000  45,000

850,000  675,000

 250,000  657,450

 
Exercise 4.  Perez Company had the following transactions during January:
1.  Jan 1  Issued $100,000 in stock to owners in exchange for cash to start the
business.
2.  Jan 5  Borrowed $50,000 from the bank by signing a notes payable.
3.  Jan 10  Purchase equipment by paying cash for $25,000.
3.  Jan 15  Paid January rent of $2,400 for the office space (hint:  since this is for
January, record as rent expense)
4.  Jan 18 Performed services for customers and received cash immediately for $8,000.
5.  Jan 20  Purchased $2,000 in supplies on account.
Prepare a transaction analysis for the January transactions.  Remember to prove the
accounting equation at the end.

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