Podcast
Questions and Answers
What happens when an owner buys equipment for the business?
What happens when an owner buys equipment for the business?
- Decreases Asset
- Increases Owner Equity (correct)
- Increases Asset (correct)
- Decreases Owner Equity
What is the effect of paying an expense such as salaries or utilities?
What is the effect of paying an expense such as salaries or utilities?
- Increases Asset
- Decreases Owner Equity (correct)
- Decreases Asset (correct)
- Increases Owner Equity
What happens when a payment is made on an account?
What happens when a payment is made on an account?
Decreases Asset (cash), decreases liability
What is the result of making repairs for a customer on account?
What is the result of making repairs for a customer on account?
What occurs when a customer pays $300 on their account?
What occurs when a customer pays $300 on their account?
What happens when a truck is bought and paid for with a check?
What happens when a truck is bought and paid for with a check?
What is the effect of withdrawing money for personal use?
What is the effect of withdrawing money for personal use?
What effect does paying salaries have on assets and owner equity?
What effect does paying salaries have on assets and owner equity?
What happens when a payment on account for equipment is made?
What happens when a payment on account for equipment is made?
What is the result of collecting $500 for services rendered?
What is the result of collecting $500 for services rendered?
What occurs when an owner invests $20,000 cash in the business?
What occurs when an owner invests $20,000 cash in the business?
What is the effect of buying a desk from Staples on account?
What is the effect of buying a desk from Staples on account?
What happens when monthly rent is paid?
What happens when monthly rent is paid?
Study Notes
Accounting Transactions Overview
- Owner purchasing equipment increases both assets and owner's equity, indicating investment in business resources.
- Paying expenses (salaries, rent, utilities, maintenance) decreases cash assets and owner's equity, reflecting operational costs.
- Making a payment on an account reduces cash assets and liabilities simultaneously, improving financial standing by lowering accounts payable.
- Performing repairs for a customer on account increases assets through accounts receivable and enhances owner's equity via generated revenue.
- Receiving payment from a customer ($300) shifts asset composition, increasing cash while decreasing accounts receivable, signaling payment fulfillment.
- Buying a truck with a check leads to an increase in asset ownership while concurrently decreasing cash assets.
- Withdrawing money for personal use diminishes cash assets and owner's equity, indicating a reduction in business investment.
- Paying salaries to assistants decreases cash assets and owner's equity, reflecting a business's expense obligations.
- Making payments on accounts for equipment purchased lowers both cash assets and liabilities, specifically accounts payable obligations.
- Collecting $500 for services rendered boosts cash assets and increases owner's equity, representing earned income for the business.
- Owner investing $20,000 in cash into the business enhances both cash assets and owner's equity, demonstrating commitment to business growth.
- Purchasing a desk from Staples on account raises asset ownership while increasing liabilities due to incurred debt (accounts payable).
- Paying monthly rent results in decreased cash assets and diminished owner's equity, showcasing regular operational expenses impacting finances.
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Description
Test your knowledge of key accounting transactions with these flashcards. Each card presents a scenario and its impact on assets and equity, helping you understand foundational accounting principles. Perfect for students and professionals alike!
