FOUNDATIONS Flashcards
Describe Assets
Things you OWN
Probable economic benefits obtained or controlled by a particular entity as a result of past transactions or events
Describe Liabilities
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
Describe Equity
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 $2,000 down as a down payment - EQUITY
A Liability is
Something you Owe
In the list below, select all the items that are assets
Savings account
Car
Computer
Unpaid Hydro Bill
Loan Payment
Savings account
Car
Computer
An Asset is
Something you Own
Equity is
Assets - Liabilities
What is the Accounting Equation
ASSETS = LIABILITIES + EQUITY
CAR PURCHASE = LOAN + DOWN PAYMENT
10,000$ = 8,000$ + 2,000$
is always in BALANCE
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
Assets and Liabilities
What is the Accounting Equation?
Assets = Liabilities – Equity
Assets – Liabilities = Equity
Assets + Liabilities = Equity
Assets = Liabilities + Equity
Assets = Liabilities + Equity
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
Equity
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
No! Sometimes only one side is affected
What are the two sub-accounts that affect Equity?
Income and Expenses
Assets and Expenses
Income and Liabilities
Income and Assets
Income and Expenses
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
Assets
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
Liabilities and Equity
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
account
TRUE OR FALSE
Debits always on the left & Credits always on the right
True
IN THE CHECKING ACCOUNT
DEBITS = MONEY IN
CREDITS = MONEY OUT
T/F
True
The set of accounts for a business is called the L____________
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
Explain the Chart of Accounts
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)
Explain the Trial Balance
Two column summary of all the debits & credit in the chart of accounts
Think book summary
