MODULE 4 Flashcards
Reviewer
Q: What is an accounting event?
A: An economic occurrence that causes changes in an entity’s assets, liabilities, and/or equity.
Q: What are the two types of events in accounting?
A: External events and internal events.
Q: What is an external event?
A: An event that involves the business and another external party, such as a sale, purchase, borrowing of money, or payment of liabilities.
Q: What is an internal event?
A: An event that does not involve an external party, such as the production of goods or services.
Q: What is a transaction in accounting?
A: A particular kind of event that involves the transfer of something of value between two entities.
Q: Give examples of transactions.
A: Acquiring assets from an owner, borrowing funds from creditors, or purchasing and selling goods or services.
Q: What happens when an asset is purchased on account or on credit?
A: There is an increase in assets and an increase in liabilities.
Q: What happens when services are performed for cash?
A: There is an increase in assets and an increase in income.
Q: What happens when payables and obligations are settled?
A: There is a decrease in liabilities and a decrease in assets.
Q: What happens when an owner withdraws assets?
A: There is a decrease in equity and a decrease in assets.
Q: What happens when a utility bill is received but not paid?
A: There is an increase in liabilities and an increase in expenses.
Q: What happens when cash is collected in advance for services?
A: There is an increase in liabilities (unearned revenue) and an increase in assets (cash).
Q: What happens when accounts receivable are collected?
A: There is an increase in one asset (cash) and a decrease in another asset (accounts receivable).
Q: What happens when an asset is purchased for cash?
