Accounting Transaction Analysis Quiz
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Questions and Answers

What is the effect of Benjamin's cash investment on the accounting equation?

  • +Cash, +Capital (correct)
  • -Cash, +Income
  • -Cash, +Drawing
  • +Cash, -Drawing
  • How does the purchase of office equipment in cash affect the accounting equation?

  • +Loan, -Office Equipment
  • +Cash, -Accounts Payable
  • +Office Equipment, -Cash (correct)
  • -Cash, +Accounts Receivable
  • What is the impact of rendering services to Mr. Elias on account?

  • -Cash, +Capital
  • +Drawing, -Income
  • +Accounts Payable, +Income
  • +Accounts Receivable, +Income (correct)
  • How does buying furniture on account affect the accounting equation?

    <p>+Accounts Payable, -Furnitures (D)</p> Signup and view all the answers

    What effect does receiving cash for services have on the accounting equation?

    <p>-Income, +Cash (C)</p> Signup and view all the answers

    How does receiving proceeds from a loan impact the accounting equation?

    <p>+Loan, +Capital (B)</p> Signup and view all the answers

    What happens to the owner's equity when assets increase according to the text?

    <p>Owner's equity increases (D)</p> Signup and view all the answers

    In accounting, a transaction is characterized by all of the following EXCEPT:

    <p>Involving only tangible assets (C)</p> Signup and view all the answers

    What happens to the owner's equity when assets decrease based on the text?

    <p>Owner's equity decreases (B)</p> Signup and view all the answers

    Which account would be affected when a business renders services on account?

    <p>Service Income (D)</p> Signup and view all the answers

    When a business receives cash from rendering services, what happens to the Cash account?

    <p>Cash increases (D)</p> Signup and view all the answers

    If assets increase, and liabilities remain the same, what happens to the owner's equity?

    <p>Increases (D)</p> Signup and view all the answers

    What is the total amount withdrawn by Miss Madrid for personal use?

    <p>₱35,000.00 (C)</p> Signup and view all the answers

    On January 15, what was the amount earned from rendering photocopying services to various customers?

    <p>₱3,500.00 (C)</p> Signup and view all the answers

    Which account represents the owner's investment in the business?

    <p>Madrid's, Capital (C)</p> Signup and view all the answers

    What is the total amount of assets after buying supplies costing ₱5,000.00 on January 18?

    <p>₱280,000.00 (B)</p> Signup and view all the answers

    On what date was a helper hired on a commission basis of 10% of sales?

    <p>January 8 (D)</p> Signup and view all the answers

    Flashcards

    What is the accounting equation?

    An accounting equation demonstrates the relationship between assets, liabilities, and owner's equity. It can be expressed as Assets = Liabilities + Owner's Equity and helps to understand the financial position of a business.

    What impact does a cash investment by the owner have on the accounting equation?

    When Benjamin invests cash into the business, it increases the business's cash assets and also increases the owner's equity (represented by Benjamin's capital).

    How does buying office equipment for cash affect the accounting equation?

    Purchasing office equipment with cash increases the business's assets (office equipment) but decreases the cash assets. The total assets remain the same.

    What is the effect of rendering services on account?

    When services are rendered to Mr. Elias on account, it means Mr. Elias owes the business money. This increases the business's Accounts Receivable (an asset) and also increases the business's Income.

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    How does buying furniture on account affect the accounting equation?

    Buying furniture on account means the business is buying furniture on credit, creating a liability. This increases the business's Accounts Payable (a liability) and reduces the Furniture asset (because it's being bought on credit).

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    What is the impact of receiving cash for services rendered on the accounting equation?

    Receiving cash for services rendered increases the business's cash assets and decreases the business's earned income. This reflects that the income has been realized by receiving cash.

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    What happens to the accounting equation when a business receives a loan?

    Receiving proceeds from a loan increases the business's assets (cash from the loan) and also increases the business's liabilities (the loan amount owed).

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    What happens to the owner's equity when assets increase?

    When assets increase, it means the business has more resources. As owner's equity represents the owner's claim on the business's assets, it also increases.

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    What is a transaction in accounting?

    A transaction must involve an exchange of value, resulting in a change in the accounting equation. Transactions are not limited to only tangible assets.

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    What happens to the owner's equity when assets decrease?

    When assets decrease it means the business has fewer resources. As owner's equity represents the owner's claim on the business's assets, it also decreases.

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    Which account is affected when services are rendered on account?

    When a business renders services on account, it means the business will receive payment later. This increases the Service Income account, reflecting the revenue earned from the services rendered.

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    How does the Cash account change when a business receives cash for services?

    When a business receives cash from rendering services, it increases the Cash account, as the business receives payment for the services rendered.

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    What happens to owner's equity when assets increase and liabilities stay the same?

    If assets increase, and liabilities remain the same, then the owner's equity must increase to maintain the balance of the accounting equation. (Assets = Liabilities + Owner's Equity)

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    What is the total amount withdrawn by Miss Madrid for personal use?

    Miss Madrid withdrew ₱35,000.00 for personal use, which is indicated in the transaction on January 28.

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    What was the amount earned from rendering photocopying services to various customers on January 15?

    On January 15, the transaction shows a cash receipt of ₱3,500.00 from photocopying services rendered.

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    Which account represents the owner's investment in the business?

    The account 'Madrid's, Capital' represents the owner's initial investment in the business, shown as ₱275,000.00 in the beginning balance.

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    What is the total amount of assets after buying supplies costing ₱5,000.00 on January 18?

    After buying supplies costing ₱5,000.00 on January 18, the total assets would be ₱280,000.00. This is calculated by adding the initial asset value (₱275,000.00) and the cost of supplies (₱5,000.00).

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    On what date was a helper hired on a commission basis of 10% of sales?

    The transaction on January 8 mentions hiring a helper on a commission basis of 10% of sales. This indicates that the helper's payment is based on the business's sales revenue.

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    Study Notes

    Accounting Equation Examples

    • Assets increased by P 200,000.00 and owner's equity also increased by the same amount when Saniata Madrid invested cash on January 1.
    • Assets decreased and owner's equity also decreased when assets decreased on May 17.

    Business Transactions and Accounting Equation

    • A transaction is characterized by an exchange of values between two parties in terms of money.
    • Transaction affects the accounting equation (Assets = Liabilities + Owner's Equity).

    Saniata's Xerox Transactions

    • On January 1, Saniata Madrid invested cash P 200,000.00 and equipment worth P 60,000.00.
    • Purchased tools for cash P 20,000.00 on an unknown date.
    • Purchased equipment on account for P 30,000.00 from Freddie Car and Auto Supplies on an unknown date.
    • Received cash from various customers P 6,500.00 on an unknown date.
    • Paid 50% of its account due to Freddie's Car and Auto Supplies on an unknown date.
    • Billed customers for the repairs of their cars, P 35,000.00 on an unknown date.
    • Madrid withdrew cash amounting to P 50,000.00 on an unknown date.
    • Collected P 20,000.00 from customers who were billed on an unknown date.
    • Paid salaries of employees, P 10,000.00, and utilities P 4,500.00 on an unknown date.

    Transaction Summary Table

    • Use "+" to indicate increase and "-" to indicate decrease in account values.
    • Determine the effect of each transaction on the accounting equation.

    Benjamin's Investments and Services

    • Invested P 300,000.00 cash.
    • Purchased office equipment in cash, P 100,000.00.
    • Rendered service to Mr. Elias on account, P 50,000.00.
    • Bought furnitures on account, P 25,000.00.
    • Received cash services, P 40,000.00.
    • Received proceeds from loan, P 300,000.00.
    • Made a partial payment for the furnitures, P 15,000.00.
    • Paid salaries of employees P 30,000.00.

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    Description

    Test your understanding of accounting transactions by analyzing a sample transaction and identifying the corresponding changes in assets, liabilities, and owner's equity. This quiz includes details such as expenses, assets, liabilities, and owner's equity accounts.

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