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

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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