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Questions and Answers
What is the effect on total assets after the equipment purchase in Transaction 3?
What is the effect on total assets after the equipment purchase in Transaction 3?
Which of the following correctly describes the Accounting Equation after Transaction 3?
Which of the following correctly describes the Accounting Equation after Transaction 3?
What is the total decrease in cash after Transaction 3?
What is the total decrease in cash after Transaction 3?
In the context of Transaction 3, what component of the balance sheet remains unchanged?
In the context of Transaction 3, what component of the balance sheet remains unchanged?
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What is the change in equipment balance after Transaction 3?
What is the change in equipment balance after Transaction 3?
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What must occur for the accounting equation to remain in balance after a transaction?
What must occur for the accounting equation to remain in balance after a transaction?
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Regarding the owner's equity after Transaction 3, which statement is true?
Regarding the owner's equity after Transaction 3, which statement is true?
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What type of transaction occurs when cash is paid to acquire equipment?
What type of transaction occurs when cash is paid to acquire equipment?
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What must be done first when analyzing a transaction?
What must be done first when analyzing a transaction?
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If assets decrease and there is no change in liabilities, what must happen to owner's equity?
If assets decrease and there is no change in liabilities, what must happen to owner's equity?
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Which step ensures the fundamental accounting equation remains in balance?
Which step ensures the fundamental accounting equation remains in balance?
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Which statement is true regarding the owner's equity after a successful transaction?
Which statement is true regarding the owner's equity after a successful transaction?
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How is an asset defined in the context of a transaction analysis?
How is an asset defined in the context of a transaction analysis?
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What must be confirmed about changes in a transaction?
What must be confirmed about changes in a transaction?
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In the context of balance sheet analysis, what does the accounting equation imply?
In the context of balance sheet analysis, what does the accounting equation imply?
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When analyzing transactions, what is the goal of identifying changes in assets or liabilities?
When analyzing transactions, what is the goal of identifying changes in assets or liabilities?
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What was the total increase in assets after Transaction 5?
What was the total increase in assets after Transaction 5?
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How did Transaction 5 affect the liabilities of Metropolitan Movers?
How did Transaction 5 affect the liabilities of Metropolitan Movers?
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What is the effect of Transaction 5 on the owner's equity?
What is the effect of Transaction 5 on the owner's equity?
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Which entry correctly represents the processing of Transaction 5?
Which entry correctly represents the processing of Transaction 5?
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What balance did the Owner's Capital account hold after Transaction 5?
What balance did the Owner's Capital account hold after Transaction 5?
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In terms of the accounting equation, what was the formula applied after Transaction 5?
In terms of the accounting equation, what was the formula applied after Transaction 5?
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What major change occurred in the Accounts Receivable after Transaction 5?
What major change occurred in the Accounts Receivable after Transaction 5?
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Which asset account was impacted by the increase affecting the total assets after Transaction 5?
Which asset account was impacted by the increase affecting the total assets after Transaction 5?
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Study Notes
Chapter 3 Study Notes
- Analyzing changes in financial position is covered in Chapter 3
- Business transactions cause changes in financial position
- A business transaction is a financial event causing a change in financial position
- Source documents are essential for verifying transaction amounts
- Examples of source documents include hydro bills, phone bills, cheque copies, store receipts, cash register summaries and credit card slips
- Accounting standards require objective evidence for transactions
- Objective evidence means different people evaluating the same information arrive at the same result; based on fact not opinion
Chapter 3, Review Questions
- Definition of business transaction
- Examples of business transactions (beyond those in the text)
- Examples of non-transactional business events (beyond those in the text)
- Definition of source document
- Examples of source documents
- Source document usage after accounting entries are complete
- Explanation of the objectivity principle with example
Chapter 3, Exercises
- Determine if the following are transactions (applying to Best Consultants of Kenora, Ontario):
- Business pays $800 to reduce debt
- Owner takes $900 from the business personally
- Employee interview for payroll position
- Business provides $700 consulting service on credit
- Business pays rent $3500
- Business hiring an employee for $800 per week
- Business buys computer for $3000
- Defective computer is replaced
- Determine if the following are transactions for Ace Collection Agency of Cornwall, Ontario:
- Gas purchase for company car $100 cash
- Owner eats lunch
- Ingrid's car needs a $500 repair
- $250 service with cash payment from a customer
- Leased computer replaced for no cost to the business
- Customer pays $300 toward a $1200 debt
Chapter 3 Summary
- Understanding financial position: assets, liabilities and equity
- Identifying transactions as financial events
- Recording transaction effects on assets, liabilities, and equity on Equation Analysis Sheet, and calculating new balances
- Calculating updated balance sheets
- Identifying source documents
- Importance of objective evidence
Chapter 4 Study Notes
- Chapter 4 covers the Simple Ledger, focusing on ledgers, accounts, debit and credit theory
- Accounts are used to record changes in the accounting equation, one for each asset, liability, or equity item
- Ledger is a complete set of accounts
- Debits are increased assets or decreased liabilities and equities; recorded on the left side of an account
- Credits are decreased assets or increased liabilities and equity; recorded on the right side of an account
- Trial balances verify that debits total credits for accounts
Chapter 4, Review Questions
- Defining debit and credit
- Setting up beginning financial position in a ledger
- Accounts which increase by debit
- Accounts which decrease by debit
- Accounts which increase by credit
- Accounts which decrease by credit
- Purpose of transaction analysis sheet
- Definition of accounting entry
- Feature of a correct accounting entry
- Conditions of an accounting entry that doesn't balance
- Conditions of a balancing accounting entry
- Definition of double-entry accounting
Chapter 4, Exercises
- Balance sheets for Stevens Woodworking and Dr. Inaba
- Prepare trial balances for C. Hernandez and Ceco Co.
- Balance ledgers for transactions from previous chapter, recording necessary debits and credits.
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