Chp 14: Equities (I)

Question 1

Explain the accounting of capital and drawings with use of one accounting theory.

Answer 1

Accounting Entity theory
States that the activities of a business are separate from the actions of the owner. All transactions are recorded from the point of view of the business

Question 2

How to calculate ending capital?

Answer 2

Beginning Capital + Additional capital + Profit (- loss) - Drawings

Question 3

Journal entries to record transfer of profit to capital account

Answer 3

Question 4

Journal entries to record transfer of Loss to capital account

Answer 4

Question 5

Journal entries to record transfer of Drawings to capital account

Answer 5

Question 6

Journal entries to record transfer of Drawings to capital account

Question 7

Describe Dec 15 transaction

Answer 7

Owner withdrew $200 cash from business for personal use.

Question 8

Describe Dec 31 transaction

Answer 8

Total drawings for the year $600 was transferred to capital account. (Note - this is done on the LAST DAY)

Question 9

Calculate the ending Capital.

Answer 9

$2 000

Question 10

Are you able to prepare the CAPITAL account? **

Answer 10

Question 11

Drawings would ______________Equity

Answer 11

Reduce

Question 12

Loss for the year would ______________Equity

Answer 12

Reduce

Question 13

Owner contributed additional equipment into business. This would ______________Equity

Answer 13

Increase