➢ accounting has frequently been dubbed the language of business. In what respects would you agree through this description? How can you argue that this summary is deficient?
➢ define asset, liability, and also stockholders’ equity.
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➢ how do liabilities and also stockholders’ same differ? how are lock similar?
➢ just how do accounts payable and notes payable differ? exactly how are castle similar?
➢ define revenues. Exactly how are revenues measured?
➢ specify expenses. How are expenses measured?
➢ What is a balance sheet? ~ above what facet of a service does the balance sheet administer information?
➢ What is an earnings statement? on what element of a service does this statement provide information?
➢ What details does the statement of retained income provide?
➢ determine the three types of tasks shown in a statement of cash flows.
➢ What is a transaction? What use does the accountant do of transactions? Why?
➢ What is the accountancy equation? Why must it always balance?
➢ Give an instance from your personal life that illustrates your usage of bookkeeping information in getting to a decision.
➢ You have actually been elected to the governing plank of her church. In ~ the first meeting you attend, mention is do of building a brand-new church. What audit information would the board need in deciding even if it is or no to walk ahead?
➢ A firm purchased equipment for $ 2,000 cash. The merchant stated that the equipment was worth $ 2,400. At what amount must the tools be recorded?
➢ What is supposed by money measurement?
➢ the what significance is the exchange-price (or cost) concept? how is the cost to gain an heritage determined?
➢ What effect does the going-concern (continuity) ide have top top the amounts at which long-term assets are brought on the balance sheet?
➢ the what prestige is the periodicity (time periods) concept to the ready of gaue won statements?
➢ define a transaction the would:
Increase both an asset and also capital stock.Increase both one asset and also a liability.Increase one asset and decrease an additional asset.Decrease both a liability and an asset.Increase both one asset and retained earnings.Decrease both one asset and retained earnings.Increase a liability and also decrease kept earnings.Decrease both an asset and retained earnings.Identify the reasons of increases and decreases in stockholders’ equityB) bookkeeping Exercises:
Exercise 1. Applying straightforward Accounting Equation
Royals Palm, Inc. Reports the adhering to assets and liabilities. Compute the totals the would appear in the corporation’s basic accounting equation (Assets = legal responsibility + Stockholders’ same (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 simple Accounting Equation
Dan and Den, Inc. Reports the adhering to assets and also liabilities. Compute the totals that would appear in the corporation’s simple accounting equation (Assets = liabilities + Stockholders’ same (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 absent 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 throughout January:
1. January 1 authorize $100,000 in share to owner in exchange for cash to start the business.
2. Jan 5 obtained $50,000 from the bank by signing a notes payable.
3. January 10 Purchase equipment by payment cash for $25,000.
3. January 15 paid January rent of $2,400 for the office an are (hint: because this is because that January, record as rental expense)
4. January 18 Performed services for customers and also received cash automatically for $8,000.
5. January 20 purchase $2,000 in offers on account.
Prepare a transaction evaluation for the January transactions. Remember come prove the accountancy equation in ~ the end.
| Assets = | Liability | + Equity | + Revenue | – Expense | ||||
| Transaction | Cash | Supplies | Equipment | Accounts Payable | Notes Payable | Common Stock | Service Revenue | Rent Expense |
| Jan 1 Issued share to owners | ||||||||
| Jan 5 obtained money from bank | ||||||||
| Jan 10 Purchased tools with cash | ||||||||
| Jan 15 payment January rent | ||||||||
| Jan 18 perform services | ||||||||
| Jan 20 Purchased offers on account | ||||||||
| Balance: |
Exercise 5. On December 31, Bryniuk’s Company, the accountancy records confirmed the following information:
| Cash | 49,500 |
| Accounts Receivable | 125,000 |
| Supplies | 1,500 |
| Prepaid Insurance | 12,000 |
| Equipment | 70,000 |
| Building | 420,000 |
| Land | 111,500 |
| Accounts Payable | 80,000 |
| Notes Payable | 170,000 |
| Common Stock | 410,000 |
| Retained Earnings | 65,000 |
| Dividends | 20,000 |
| Service Revenue | 174,000 |
| Interest Revenue | 1,000 |
| Salaries Expense | 52,000 |
| Advertising Expense | 17,000 |
| Insurance Expense | 5,000 |
| Utilities Expense | 13,750 |
| Interest Expense | 2,750 |
Prepare the revenue Statement for year finished December 31.
| Bryniuk’s Company | |
| Income Statement | |
| For Year ended December 31 | |
| Revenues: | . |
| complete Revenues | |
| Expenses: | |
| complete Expenses | |
| Net Income |
Exercise 6. Utilizing the info from exercise 5, prepare the explain of Retained revenue for December 31.
| Bryniuk’s Company | |
| Statement of preserved Earnings | |
| For Year ended December 31 | |
| Beginning maintained Earnings | $65,000 |
| Add: network Income | |
| Subtract: Dividends | |
| Ending Retained earnings |
Exercise 7. Using the info from exercises 5 and also 6, prepare the Balance Sheet because that December 31.
| Bryniuk’s Company | |||
| Balance Sheet | |||
| December 31 | |||
| Assets | Liabilities and also Equity | ||
| Total Liabilities | |||
| Total Equity | |||
| Total Assets | Total Liabilities and also Equity |
Problem 1: Prepare the financial statements of RodCast Company using the adhering to information:
| Accounts Payable | 43,100.00 |
| Accounts Receivable | 85,000.00 |
| Cash | 55,320.00 |
| Common Stock | 125,000.00 |
| Dividends | 28,000.00 |
| Machinery | 70,000.00 |
| Rent Expense | 24,000.00 |
| Retained Earnings | 70,000.00 |
| Salaries Expense | 65,000.00 |
| Service Revenue | 165,320.00 |
| Supplies | 2,350.00 |
| Trucks | 60,000.00 |
| Utilities Expense | 13,750.00 |
1. Classify each account by Account form (Asset, Liability, Equity, Revenue or Expense) and i beg your pardon financial declare (income statement, explain of maintained earnings, or balance sheet) it appears on.
| Account | Account type | Financial statement |
2. Prepare the revenue Statement, statement of preserved Earnings and Balance Sheet for the month finished October 31.
Comprehensive problems Example:
Larson’s audit Company has the complying with account balances: Cash, $5,000; account Receivable, $2,000; Prepaid rental $1,500; Supplies, $850; Equipment, $6,000; Trucks, $15,000; accounts Payable, $2,500; usual Stock, $20,000; Retained income $7,850. Company transactions during December space presented as follows:Company got cash indigenous clients because that services, $4,500Larson payment to creditor $500,Paid office rent because that the month of December, $750,Company billed client for bookkeeping services top top account, $5,200Supplies were purchased on account, $650,Company got cash from client billed previously, $6,000Larson obtained an invoice because that office tools repair services from Office Extra for December (the invoice will be paid following month), $850,Larson payment monthly salaries, $2,700,Utilities price were paid, $280,Miscellaneous expense were paid, $350,Dividends to be paid, $550.| Assets = | Liabilities | + Stockholders’ same | + network Income | ||||||||||
| Cash | Accounts Receivable | Prepaid Rent | Supplies | Equipment | Trucks | Accounts Payable | Common stock | + retained Earnings | – Dividends | Revenue | – expenses | Expense Type | |
| Previous Balances | $5,000 | $2,000 | $1,500 | $850 | $6,000 | $15,000 | $2,500 | $20,000 | $7,850 | ||||
| 1 | 4,500 | 4,500 | |||||||||||
| 2 | -500 | -500 | |||||||||||
| 3 | -750 | 750 | Rent expense | ||||||||||
| 4 | 5,200 | 5,200 | |||||||||||
| 5 | 650 | 650 | |||||||||||
| 6 | 6,000 | -6,000 | |||||||||||
| 7 | 850 | 850 | Repair expense | ||||||||||
| 8 | -2,700 | 2,700 | Salary expense | ||||||||||
| 9 | -280 | 280 | Utilities expense | ||||||||||
| 10 | -350 | 350 | Misc. Expense | ||||||||||
| 11 | -550 | 550 | |||||||||||
| Ending Balance: | $11,120 | $1,200 | $750 | $1,500 | $6,000 | $15,000 | $3,500 | $20,000 | $7,850 | $550 | $9,700 | $4,930 |
| Fees earned | $9,700 | |
| Expenses: | ||
| Rent Expense | $750 | |
| Repair Expense | 850 | |
| Wages Expense | 2700 | |
| Utilities Expense | 280 | |
| Miscellaneous expense | 350 | |
| Total Expenses | $4,930 | |
| Net earnings ($9,700 – $4,930)= | $4,770 |
| Larson Inc., kept Earnings, December 31 | $ 7,850 | |
| Net revenue for the month | $4,770 | |
| Less Dividends | – 550 | |
| Increase in Stockholders’ Equity | + 4,220 | |
| Larson Inc., preserved Earnings, December 31 | $12,070 |
| Larson Company | |||
| Balance Sheet | |||
| Month finished December 31 | |||
| Assets | Liabilities | ||
| Cash | $11,120 | Accounts Payable | $3,500 |
| Accounts Receivable | 1,200 | ||
| Prepaid Rent | 750 | Stockholders’ Equity | |
| Supplies | 1,500 | Common Stock | 20,000 |
| Equipment | 6,000 | Retained Earnings | 12,070 |
| Trucks | 15,000 | ||
| Total Assets | $35,570 | Total Liabilities and also Stockholders’ equity | $35,570 |
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Required:Apply the straightforward accounting equation (create a spreadsheet, you re welcome see an extensive example) to finish a transaction evaluation for each transaction (hint: enter the balances provided first).Prepare revenue statement at the finish of December 31.Prepare statement of retained income equity at the finish of December 31.Prepare balance sheet at the finish of December 31.