Podcast
Questions and Answers
What effect does issuing capital stock in exchange for cash have on total assets?
What effect does issuing capital stock in exchange for cash have on total assets?
- Decrease
- Depends on the amount
- No effect
- Increase (correct)
Paying cash on accounts payable has no effect on total assets.
Paying cash on accounts payable has no effect on total assets.
True (A)
How does purchasing office supplies for cash affect total assets?
How does purchasing office supplies for cash affect total assets?
Increase
A loan made to an employee would ______ total assets.
A loan made to an employee would ______ total assets.
Match the types of accounts to their correct classifications:
Match the types of accounts to their correct classifications:
What does unearned revenue represent on the balance sheet?
What does unearned revenue represent on the balance sheet?
Which of these transactions would decrease total assets?
Which of these transactions would decrease total assets?
Building is classified under stockholders' equity on the balance sheet.
Building is classified under stockholders' equity on the balance sheet.
Financial reporting ignores the impacts of transactions on the financial position of an entity.
Financial reporting ignores the impacts of transactions on the financial position of an entity.
What classification would supplies inventory fall under?
What classification would supplies inventory fall under?
Define a business transaction in accounting terms.
Define a business transaction in accounting terms.
Every accounting transaction has at least two effects on the __________ equation.
Every accounting transaction has at least two effects on the __________ equation.
Which of the following is NOT a common balance sheet account title?
Which of the following is NOT a common balance sheet account title?
Transactions can only occur between a business and customers, but not internally.
Transactions can only occur between a business and customers, but not internally.
Match the account types with their classifications:
Match the account types with their classifications:
What is the dual effects concept in accounting?
What is the dual effects concept in accounting?
What must be true about the accounting equation after recording each transaction?
What must be true about the accounting equation after recording each transaction?
A company’s assets and stockholders' equity both decrease when it sells additional shares of stock in exchange for cash.
A company’s assets and stockholders' equity both decrease when it sells additional shares of stock in exchange for cash.
What is the normal balance for an asset account?
What is the normal balance for an asset account?
Purchasing stock of another company for cash results in an __________ in total assets for the purchasing company.
Purchasing stock of another company for cash results in an __________ in total assets for the purchasing company.
Match the transaction with its impact on the accounting equation:
Match the transaction with its impact on the accounting equation:
Which of the following statements about liabilities is correct?
Which of the following statements about liabilities is correct?
The journal entry for purchasing equipment increases both cash and liabilities.
The journal entry for purchasing equipment increases both cash and liabilities.
What happens to total assets when a company receives cash for services rendered?
What happens to total assets when a company receives cash for services rendered?
Study Notes
Effects of Transactions on Total Assets
- Issuing capital stock for cash increases total assets.
- Paying cash on accounts payable has no effect on total assets.
- Loaning money to an employee increases total assets.
- Borrowing money from the bank increases total assets.
- Collecting cash on accounts receivable has no effect on total assets, assets are simply converted from one form to another.
- Purchasing a building with cash and a mortgage increases total assets.
- Purchasing office supplies on credit has no effect on total assets.
- Purchasing office supplies with cash increases total assets.
Balance Sheet Account Classifications
- Notes payable due in 3 months is classified as a current liability.
- Income taxes payable is classified as a current liability.
- Prepaid expenses is classified as an asset.
- Accounts receivable is classified as an asset.
- Supplies inventory is classified as an asset.
- Land is classified as an asset.
- Building is classified as an asset.
Transactions and the Accounting Equation
- A transaction is an exchange of assets or services for assets, services, or promises to pay between a business and one or more external parties to a business or a measurable internal event.
- The dual effects concept states that every transaction has at least two effects on the accounting equation.
- Every accounting transaction must keep the accounting equation in balance.
- Selling additional shares of stock for cash increases both assets and stockholders' equity.
- Purchasing stock of another company for cash has no effect on the total asset amount.
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Description
This quiz explores the effects of various transactions on total assets, including issuing capital stock and loaning money. Additionally, it covers classifications on the balance sheet related to assets and liabilities. Test your knowledge on how different actions impact financial statements.
