final Flashcards
sell products purchased from other businesses.
merchandising business
A(n) __________ changes basic inputs into products that are sold to customers.
manufactoring business
The business entity concept is important because
it limits economic data in the accounting system to data directly related to the activities of the business.
Equipment with a sales price of $100,000 is purchased at a discount of 10% by Aaron Company. At what value should the equipment be recorded in Aaron Company’s records?
90,000
Which of the following concepts requires that economic data be recorded in dollars in the United States?
Unit of measure concept
Clayton Company purchased a new welder for $3,500. Clayton paid $1,000 cash down and will pay the remainder in 60 days. What effect does this transaction have on the accounting equation?
$2,500 net increase in assets and $2,500 increase in liabilities
Which of the following statements is not true?
None of these statements are true
Marvin Company negotiated the purchase of a new building for $250,000. Marvin paid a $100,000 cash down payment and will pay off the remainder over seven years. What effect does this transaction have on the accounting equation?
$150,000 net increase in assets and $150,000 increase in liabilities
Cool Taste Company recorded $5,000 in sales on account for the week. What effect does this transaction have on the accounting equation?
$5,000 increase in assets and $5,000 increase in owner’s equity
Clayton Company purchased a new welder for $3,500. Clayton paid $1,000 cash down and will pay the remainder in 60 days. What effect does this transaction have on the accounting equation?
$2,500 net increase in assets and $2,500 increase in liabilities
All business transactions can be stated in terms of
changes in the elements of the accounting equation
The following data were taken from Reynolds Company’s balance sheet:
Dec. 31, 20Y7 Dec. 31, 20Y6
Total liabilities $240,000 $210,000
Total owner’s equity $160,000 $150,000
Which of the following best explains the change in creditors’ risk from 20Y6 to 20Y7?
risk increased
The numerator in the calculation of the ratio of liabilities to owner’s equity is
total liabilities
The ratio of liabilities to owner’s equity is a tool used to assess a company’s ability to
pay its creditors
the statement that provides the financial position of a company as of a specific date is the
balance sheet
The statement that reports net income or loss for a certain period in time is the
income statement
The amounts needed to calculate the ratio of liabilities to owner’s equity can be found on
balance sheet
The right-hand side of a T account is called the
credit side
The chart of accounts is a
list of the accounts in the ledger.
Which of the following statements is FALSE regarding T accounts?
a. The excess of the credits of an owner’s equity account over the debits is the balance of the account.
b. A T account is not the same thing as the general ledger.
c. The excess of the credits of an asset account over the debits is the balance of the account.
d. The excess of the credits of a liability account over the debits is the balance of the account.
The excess of the credits of an asset account over the debits is the balance of the account.
The journal entry to pay creditors on account would include
a debit to Accounts Payable
The journal entry to record fees of $13,500 earned on account would include
a debit to Accounts Receivable for $13,500 and a credit to Fees Earned for $13,500
The normal balance of an asset account is
a debit
The debits and credits for each journal entry are posted to the accounts
in the order in which they occur in the journal.