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PART 1 1.)What is the accounting equation? It is an equation that explains the relationship between liabilities, assets and owner’s equity in a company or in a business. It is; Assets=Liabilities+Owner’s equity 2.)Do you use debit or credit to increase an asset? Debit 3.)Do you use debit or credit to increase an account under Liabilities?Credit 4.)Do you use debit or credit to decrease an account under Owner’s/Stockholder’s Equity? debit 5.)Fill in the missing number in place of the question mark: Assets= Liabilities+Owner’s Equity $40,000 = $10,000 + $30,000 6.)What component within the accounting equation would “Cash” fall under? Asset 7.)What component within the accounting equation would “Accounts Payable” fall under?Liabilities 8.)How would you increase a business’s “Land” account, debit or credit?Debit 9.)What component within the accounting equation would “Service Revenue” fall under? Owner’s equity 10.)Do you use debit or credit to decrease an “Asset” account? Credit 11.)These are main types of accounting in which businesses incorporate.One of these is Cash Base Accounting.What is the other one? Accrual base 12.)Fill in the blank for the following statement.Under Cash Base Accounting, you record the transactions as _cash____ flows in and out of the business. 13Fill in the blank for the following statement.Accrual Base Accounting is when the accountant records the transactions are the services and expenses are __incurred_____. 14Which accounting method (Case Base vs. Accrual Base) gives a more accurate picture of the financial health of a company? Accrual base 15If a company does not specify (especially in your homework) whether they practice Accrual Base Accounting vs. Cash Base Accounting, which one would you automatically assume is being utilized by the accounting team? Cash base 16The financial records of the owner and the business should NEVER be combined.This is referred to as the, “______Business entity concept____________”. 17List the four Financial Statements in the order they would be created which a for-profit business would produce after each accounting period: 1.statement of financial position 2.income statement 3.cash flow statement 4.statement of changes in equity 18Which Financial Statement calculates Net Income/Profit for a business? Income statement 19Which Financial Statement shows the “The Accounting Equation” and how it balances? Statement of financial position 20Which Financial Statement shows the changes in the dollar amount of Ownership within the business? Cashflow statement 21An expense account is under what section of The Accounting Equation? Assets 22How do you increase an expense account, debit or credit? Debit 23How do you increase all other Owner’s/Stockholder’s Equity Account, other than expense and owner withdrawal amounts? Credit 24For accounts under the Owner’s/Stockholder’s Equity account which are increased with a debit, what are these referred to? Withdrawals 25Under what part of The Accounting Equation are Prepaid Expenses listed under? Assets 26Under what section The Accounting Equation are Revenue accounts listed under? Owner’s equity 27How are Revenue accounts increased, debit or credit? Credit 28Input in the missing numbers within this journal entry (labeled with a “?”) 10/1/2015 Prepaid Rental Expense $3,000 Cash $3,000 Prepaid 3 months’ worth of rent ($1,000 x 3) 10/31/2015 Rental Expense?1000 Prepaid Rental Expense?2000 (Recognized one month of expense out of Prepaid Expense Account) 29.Where is the unearned revenue account listed under The Accounting Equation? Liabilities 30In the general journal when entering in the debits and credits, which entry is usually on top, credit or debit? Debit 31What are the three inventory accounting methods discussed within the lecture? Weighted Average, LIFO,FIFO 32Which inventory accounting method is no longer accepted by General Accepted Accounting Principles (GAAP)? Weighted average 33What dictates the reason why an accountant would choose one of the three inventory accounting methods (FIFO, LIFO, or Weighted Average)? The perishability or the shelf life of a product 34What is the principle called for when you match the expenses incurred with the revenue made, in which satisfies the purpose for which the expense was incurred? Matching principle 35Which inventory method accounts for the most recent inventory purchased first within its calculation? LIFO 36Which inventory method accounts for the least recent inventory purchased first within its calculation? FIFO 37Which inventory method accounts for neither least recent or most recent inventory purchased first within its calculation? Weighted Average 38From the accounting equation, which part of the equation represents what you owe?Liabilities 39From the accounting equation, which part of the equation represents what you own? Assets 40From the accounting equation, which part of the equation represents what you have? Owner’s equity PART 2 Why do most businesses fail within the first few years?If an Accounts Receivable account is not eventually converted into cash, what happens to the amount of money in the account after a pre-determined period of time?It’s possible to make a lot of sales, pay minimal expense, and still go bankrupt.True or False?Most businesses practice Accrual Base or Cash Base Accounting?What is the first step when reconciling your cash account/bank statement?What is the second step when reconciling your cash account/bank statement?What is the third step when reconciling your cash account/bank statement?What is the fourth step when reconciling your cash account/bank statement?How often should a reconciliation of the cash account occur?If a client writes the company a bad check to pay for services/products, and you charge them an administrative fee to make sure the amount eventually gets paid.What type of account is credited? According to the Week 6 lecture, how can a business increase sales of the company?What kind of a fee do you have to pay if you accept credit cards?What term is used to describe the value of a company has through its reputation?Would goodwill be considered a tangible or an intangible asset?What is the equivalent of depreciation for an intangible asset?What is the equivalent of depreciation for a natural resource?What are the three items needed to calculate depreciation?A piece of equipment is purchased for $10,000, has a salvage value of $2,000, and an estimated useful life of 4 years.Using the straight-line depreciation method, how much is depreciated per year for the next 4 years?A piece of equipment is purchased for $10,000, has a salvage value of $2,000, and an estimated useful life of 4 years.Using the double-declining balance method, how much is depreciated per year for the next 2 years?How does an “Accumulated Deprecation” account get increased; debit or credit?What are the three levels of the Cash Flow Statement?What type of income statement separates out the “Gross Margin”, “Operating Income” and “Net Income”?What does FUTA stand for?What does FICA stand for?What amount is income capped at to pay FICA – Social Security Tax on?What is the term given to the borrower of a bond?What is the term given to the lender of a bond?What is the interest rate called which is multiplied by the bond’s face value when issuing pre-determined payments to the bondholder?What is the amount to pay off the bond (debt) when it is more than the face value?What is the amount to pay off the bond (debt) when it is less than the face value?What step takes place after the accountant analyzes the transaction (Step 1).What is the step before the final step (Step 8: Close the Books).Which financial statement displays how the accounting equation balances?Are revenue, expense, and withdrawal accounts temporary or permanent accounts?Are cash, equipment, accounts payable, and capital accounts temporary or permanent accounts?The General ___________ is a diary of each specific account from under each component of the accounting equation. What are the three reports within the Accounting Worksheet?What is the report called which is the preliminary to the Income Statement and Balance Sheet (it’s contained in the Accounting Worksheet).What account are the temporary accounts closed out to before everything is taken to Retained Earnings?What is the most fundamental lesson in which the accounting profession is built off of? PART 3 (75 WORDS) •How do the different types of the Accounting Inventory Methods (FIFO, LIFO, or Weighted-Average) operate? •How does a firm go about choosing which Accounting Inventory Method works? PART 4 (75 WORDS) •What is the importance of the turnover of Accounts Receivables? •Why is it is essential for organizations to keep cash reserves on hands? •Is it possible to still bring in a lot of revenue, but still be short on cash? •How can this happen or not happen?
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