Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Accounting Assistant > Accounting Equation > Flashcards

Accounting Equation Flashcards

1
Q

What is the accounting equation for a sole proprietorship?

A

Assets = Liabilities + Owner’s Equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the accounting equation for a corporation?

A

Assets = Liabilities + Stockholders’ Equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define assets in the context of the accounting equation.

A

Resources that a company owns, such as cash, inventory, and equipment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Define liabilities in the context of the accounting equation.

A

Obligations or amounts that a company owes to others.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is owner’s equity?

A

The amount remaining after liabilities are deducted from assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How is owner’s equity calculated?

A

Assets - Liabilities = Owner’s (or Stockholders’) Equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the purpose of the double-entry accounting system?

A

To ensure that every business transaction affects at least two accounts, maintaining balance in the accounting equation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What does the balance sheet report?

A

A company’s assets, liabilities, and owner’s (or stockholders’) equity at a specific point in time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What does the income statement report?

A

A company’s revenues and expenses, resulting in net income over a period of time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

True or False: The accounting equation must always remain in balance.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Fill in the blank: Withdrawals of company assets by the owner for personal use are known as _______.

A

draws

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What happens when a company borrows money from a bank?

A

Assets increase and liabilities increase by the same amount.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the effect of purchasing equipment for cash on the accounting equation?

A

One asset increases and another asset decreases, resulting in no effect on total assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How does an expense affect the accounting equation?

A

It decreases assets and decreases owner’s equity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the effect on the accounting equation when the owner invests personal funds into the business?

A

Assets increase and owner’s equity increases by the same amount.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

List examples of assets.

A
  • Cash
  • Accounts Receivable
  • Inventory
  • Prepaid Insurance
  • Investments
  • Land
  • Buildings
  • Equipment
  • Goodwill
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

List examples of liabilities.

A
  • Notes Payable
  • Accounts Payable
  • Salaries and Wages Payable
  • Interest Payable
  • Income Taxes Payable
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the effect of an owner’s drawing on the accounting equation?

A

Assets decrease and owner’s equity decreases.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What accounts are involved when a company records an owner’s investment?

A
  • Cash
  • J. Ott, Capital
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What accounts are involved when a company records an owner’s drawing?

A
  • Cash
  • J. Ott, Drawing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the accounting equation?

A

Assets = Liabilities + Owner’s Equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What happens to assets when ASC pays $600?

A

Assets decrease by $600

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How does an expense affect owner’s equity?

A

Owner’s equity decreases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is recorded in the expense account when ASC incurs an expense?

A

Advertising Expense

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is the general journal entry to record the $600 advertising expense?

A

Debit Advertising Expense $600, Credit Cash $600

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What are the total assets for Accounting Software Co. after the first five transactions?

A

$16,300

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is the total liabilities after the first five transactions?

A

$7,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What is the owner’s equity after the first five transactions?

A

$9,300

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What does the income statement report?

A

Company’s revenues, expenses, gains, and losses during a specified time interval

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What is the net income for ASC for the first five days of December?

A

-$600

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What effect does ASC’s consulting service transaction on December 6 have on the accounting equation?

A

+$900 = No Effect + +$900

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What journal entry is made for the consulting services billed on December 6?

A

Debit Accounts Receivable $900, Credit Service Revenues $900

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What are the total assets for ASC after six transactions?

A

$17,200

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What is the total owner’s equity after the sixth transaction?

A

$10,200

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

What is the effect on the accounting equation for the temporary help service used on December 7?

A

No Effect = +$120 + -$120

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

What journal entry is made for the temp service expense on December 7?

A

Debit Temp Service Expense $120, Credit Accounts Payable $120

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What is the net income for ASC for the first seven days of December?

A

$180

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

What happens to assets when ASC receives $500 from clients on December 8?

A

+$500 - $500 = No Effect + No Effect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What is the journal entry for the collection of accounts receivable on December 8?

A

Debit Cash $500, Credit Accounts Receivable $500

40
Q

What is the ending owner’s equity for ASC on December 8?

A

$10,080

41
Q

What does the statement of changes in owner’s equity summarize?

A

Changes in owner’s equity over a period of time

42
Q

What is the owner’s equity at December 31, 2022, given assets and liabilities?

A

$60,000

43
Q

Fill in the blank: The income statement is a link between __________.

A

balance sheets

44
Q

True or False: The owner’s draws reduce owner’s equity.

A

True

45
Q

What is the accounting equation for a sole proprietorship?

A

Assets = Liabilities + Owner’s Equity

46
Q

What was the owner’s equity at December 31, 2022?

A

$60,000

47
Q

How is owner’s equity at December 31, 2023 calculated?

A

$128,000 - $34,000 = Owner’s Equity, which is $94,000

48
Q

What is the subtotal of owner’s equity after adding owner’s investment and net income?

A

$134,000

49
Q

Fill in the blank: Owner’s equity at December 31, 2023 is ______.

A

$94,000

50
Q

What is the net income calculated in Step 5?

A

$64,000

51
Q

What happens to the accounting equation when a corporation receives an investment?

A

Assets increase and Stockholders’ Equity increases by the same amount.

52
Q

In Corporation Transaction C1, how much did the Ott family invest?

A

$10,000

53
Q

What is the journal entry for the investment made by the Ott family?

A

Debit Cash $10,000, Credit Common Stock $10,000

54
Q

What effect does the purchase of treasury stock have on the accounting equation?

A

Assets decrease and Stockholders’ Equity decreases by the same amount.

55
Q

What was the total assets after Transaction C2?

A

$9,900

56
Q

What is the effect on the accounting equation when a corporation purchases equipment?

A

One asset increases while another asset decreases, resulting in no effect on total assets.

57
Q

In Transaction C4, how much did ASI borrow from the bank?

A

$7,000

58
Q

What effect does borrowing money have on the accounting equation?

A

Assets increase and Liabilities increase by the same amount.

59
Q

What was the total assets after Transaction C4?

A

$16,900

60
Q

What happens to stockholders’ equity when an expense is incurred?

A

Stockholders’ equity decreases.

61
Q

What is the journal entry for the advertising expense transaction in Transaction C5?

A

Debit Advertising Expense $600, Credit Cash $600

62
Q

What is the total assets after Transaction C5?

A

$16,300

63
Q

True or False: The purchase of a corporation’s own stock results in an amount to be reported on the income statement.

A

False

64
Q

What are the total assets for Accounting Software, Inc. as of December 5, 2023?

A

$16,300

65
Q

What is the total liabilities for Accounting Software, Inc. as of December 5, 2023?

A

$7,000

66
Q

What is the total stockholders’ equity for Accounting Software, Inc. as of December 5, 2023?

A

$9,300

67
Q

What does the income statement report?

A

The company’s revenues, expenses, gains, and losses for a specified time period.

68
Q

What was the net income for Accounting Software, Inc. for the five days ended December 5, 2023?

A

$(600)

69
Q

True or False: The income tax expense is reported on the income statement for a Subchapter S corporation.

A

False

70
Q

What amount was billed for consulting services performed on December 6, 2023?

A

$900

71
Q

What is the effect on the accounting equation when a service is performed and billed?

A

+$900 in Assets, No Effect on Liabilities, +$900 in Stockholders’ Equity

72
Q

What is the general journal entry for recording service revenues on December 6, 2023?

A

Debit Accounts Receivable $900, Credit Service Revenues $900

73
Q

What were the total assets for Accounting Software, Inc. as of December 6, 2023?

A

$17,200

74
Q

What is the total liabilities for Accounting Software, Inc. as of December 6, 2023?

A

$7,000

75
Q

What is the total stockholders’ equity for Accounting Software, Inc. as of December 6, 2023?

A

$10,200

76
Q

What were the total expenses for Accounting Software, Inc. for the six days ended December 6, 2023?

A

$720

77
Q

What is the ending retained earnings for Accounting Software, Inc. as of December 6, 2023?

A

$300

78
Q

What transaction occurred on December 7, 2023, and what is its effect on the accounting equation?

A

Used temp service for $120, resulting in No Effect on Assets, +$120 in Liabilities, -$120 in Stockholders’ Equity

79
Q

What is the general journal entry for utilizing the temp service on December 7, 2023?

A

Debit Temp Service Expense $120, Credit Accounts Payable $120

80
Q

What is the total assets for Accounting Software, Inc. as of December 7, 2023?

A

$17,200

81
Q

What are the total liabilities for Accounting Software, Inc. as of December 7, 2023?

A

$7,120

82
Q

What is the total stockholders’ equity for Accounting Software, Inc. as of December 7, 2023?

A

$10,080

83
Q

What was the net income for Accounting Software, Inc. for the seven days ended December 7, 2023?

A

$180

84
Q

What was the effect on the accounting equation when ASI received $500 from clients on December 8, 2023?

A

+$500 in Assets, -$500 in another Asset, No Effect on Liabilities or Stockholders’ Equity

85
Q

What is the general journal entry to record the increase in Cash and decrease in Accounts Receivable on December 8, 2023?

A

Debit Cash $500, Credit Accounts Receivable $500

86
Q

What is the expanded accounting equation for a corporation?

A

Assets = Liabilities + Paid-in Capital + Revenues - Expenses - Dividends - Treasury Stock

87
Q

What is the net income calculated from the expanded accounting equation for the corporation?

A

$180

88
Q

What is the expanded accounting equation used to calculate net income?

A

Revenues - Expenses = Net Income

In this case, Revenues are $900 and Expenses are $720, resulting in a Net Income of $180.

89
Q

If Revenues are $900 and Expenses are $720, what is the Net Income?

A

$180

Net Income is calculated as Revenues minus Expenses.

90
Q

True or False: The materials provided are a comprehensive guide to all accounting and bookkeeping topics.

A

False

The materials are an introduction and do not cover all complexities.

91
Q

What should you do for assistance with specific accounting and tax circumstances?

A

Consult with accounting and tax professionals

This ensures that you receive tailored advice for your situation.

92
Q

Fill in the blank: The net income can be calculated using the formula _______ - Expenses.

A

Revenues

This formula is essential for determining profitability.

93
Q

What are the total Revenues and Expenses in the example provided?

A

Revenues: $900, Expenses: $720

These figures are used to calculate the Net Income.

94
Q

What is the conclusion regarding the complexity of accounting topics covered in the materials?

A

Some complexities are not presented

Differences between financial statement reporting and income tax reporting are examples of complexities.

95
Q

What is the formula for calculating Net Income?

A

Revenues - Expenses

This formula highlights the relationship between income and expenses.

96
Q

What is the value of the Expenses in the provided accounting example?

A

$720

This figure is subtracted from Revenues to find Net Income.

Accounting Assistant (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions