FOUNDATIONS

Question 1

Describe Assets

Answer 1

Things you OWN

Probable economic benefits obtained or controlled by a particular entity as a result of past transactions or events

Question 2

Describe Liabilities

Answer 2

Debits you OWE - eg Loans, Bills

Probable future sacrifices or economic benefits arising from present obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of part transactions or events

Question 3

Describe Equity

Answer 3

What’s left over between the Assets & Liabilities

The residual interest in the assets of an entity that remains after deducting its liabilities

Example: Purchasing a car
You buy a $10,000 car - Car = ASSET
You take out a $8,000 Loan = Loan = LIABILITY
You pay $2,000 down as a down payment - EQUITY

Question 4

A Liability is

Answer 4

Something you Owe

Question 5

In the list below, select all the items that are assets

Savings account
Car
Computer
Unpaid Hydro Bill
Loan Payment

Answer 5

Savings account
Car
Computer

Question 6

An Asset is

Answer 6

Something you Own

Question 7

Equity is

Answer 7

Assets - Liabilities

Question 8

What is the Accounting Equation

Answer 8

ASSETS = LIABILITIES + EQUITY
CAR PURCHASE = LOAN + DOWN PAYMENT
10,000$ = 8,000$ + 2,000$

is always in BALANCE

Question 9

Rosemary got a 24-month 0% loan from a store to buy a copier. The copier cost $1500. Which parts of the accounting equation does this impact?

Assets
Liabilities and Equity
Assets and Equity
Assets and Liabilities

Answer 9

Assets and Liabilities

Question 10

What is the Accounting Equation?

Assets = Liabilities – Equity
Assets – Liabilities = Equity
Assets + Liabilities = Equity
Assets = Liabilities + Equity

Answer 10

Assets = Liabilities + Equity

Question 11

If a business owner uses $10,000 of his personal money as a down-payment on the purchase of a piece of property for the business, that $10,000 would be considered

A liability
An asset
Equity

Answer 11

Equity

Question 12

Both sides of the accounting equation are ALWAYS affected.

Yes! Both sides are always affected.
No! Both sides must match.
Yes! Both sides must match.
No! Sometimes only one side is affected

Answer 12

No! Sometimes only one side is affected

Question 13

What are the two sub-accounts that affect Equity?

Income and Expenses
Assets and Expenses
Income and Liabilities
Income and Assets

Answer 13

Income and Expenses

Question 14

Rosemary bought some inventory for $2,000 cash. Which part(s) of the accounting equation does this impact?

Assets and Equity
Assets and Liabilities
Liabilities and Equity
Assets

Answer 14

Assets

Question 15

Rosemary bought some advertising for $150 on her credit card. Which part(s) of the accounting equation does this impact?

Assets and Liabilities
Assets
Liabilities and Equity
Assets and Equity

Answer 15

Liabilities and Equity

Question 16

The following is an Account Debit or Credit Definition

The simple way to record and give details of the increases and decreases of the balances of assets, liabilities, equity, income and expenses

Its a way to keep score

Answer 16

account

Question 17

TRUE OR FALSE

Debits always on the left & Credits always on the right

Answer 17

True

Question 18

IN THE CHECKING ACCOUNT

DEBITS = MONEY IN
CREDITS = MONEY OUT

T/F

Answer 18

True

Question 19

The set of accounts for a business is called the L____________

Answer 19

Ledger

Used to classify & summarize financial transactions (think of it as the guts of a book)

bridge from individual transactions to helping build the financial statements

Question 20

Explain the Chart of Accounts

Answer 20

Its the listing of all accounts used by the buiz to record and classify financial transactions

listing of accounts we use in the ledger (table of contents)

Question 21

Explain the Trial Balance

Answer 21

Two column summary of all the debits & credit in the chart of accounts

Think book summary