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Questions and Answers
What is the fundamental accounting equation?
What is the fundamental accounting equation?
A debit to an asset account increases the balance of that account.
A debit to an asset account increases the balance of that account.
True (A)
When a company receives cash from a customer to pay off their account, what two accounts are affected and how are they affected?
When a company receives cash from a customer to pay off their account, what two accounts are affected and how are they affected?
The cash account is increased with a debit entry, and accounts receivable is decreased with a credit entry.
When a sale of inventory occurs, the transaction is recorded in _______ steps.
When a sale of inventory occurs, the transaction is recorded in _______ steps.
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When a company sells a product for cash, the cash account increases and a revenue account is decreased.
When a company sells a product for cash, the cash account increases and a revenue account is decreased.
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If a company sells goods for $15,000 on account, what account would be credited in the first step of recording the sale?
If a company sells goods for $15,000 on account, what account would be credited in the first step of recording the sale?
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Match the following accounts to their classification:
Match the following accounts to their classification:
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What is the impact on Retained Earnings when inventory is decreased by $5,000?
What is the impact on Retained Earnings when inventory is decreased by $5,000?
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A debit to Accounts Payable increases the total amount a company owes.
A debit to Accounts Payable increases the total amount a company owes.
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What type of account is debited when a company receives cash from a sale?
What type of account is debited when a company receives cash from a sale?
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When a company sells goods on credit, it debits ______.
When a company sells goods on credit, it debits ______.
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What is the combined change in Retained Earnings (RE) for the April 17 transaction?
What is the combined change in Retained Earnings (RE) for the April 17 transaction?
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Match the following transactions with their effect on the cash account:
Match the following transactions with their effect on the cash account:
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What is the balance of the Inventory account, after including the April transactions, at the end of the month?
What is the balance of the Inventory account, after including the April transactions, at the end of the month?
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A credit to cash increases its balance.
A credit to cash increases its balance.
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In a Statement of Financial Position, which of the following is a component of Assets?
In a Statement of Financial Position, which of the following is a component of Assets?
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The total assets must always equal the total liabilities and equity in a Statement of Financial Position.
The total assets must always equal the total liabilities and equity in a Statement of Financial Position.
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Besides assets, what are the two other main categories in a statement of financial position?
Besides assets, what are the two other main categories in a statement of financial position?
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In the Simply Bricks example, the total value of current assets is $______.
In the Simply Bricks example, the total value of current assets is $______.
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Match the following terms with their corresponding categories in a Statement of Financial Position:
Match the following terms with their corresponding categories in a Statement of Financial Position:
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If a company's total assets are $200,000 and its total liabilities are $75,000, what is the total equity?
If a company's total assets are $200,000 and its total liabilities are $75,000, what is the total equity?
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Inventory is classified as a liability in the Statement of Financial Position.
Inventory is classified as a liability in the Statement of Financial Position.
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What is the other name for the Statement of Financial Position?
What is the other name for the Statement of Financial Position?
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When using T-accounts, which side is generally used to record increases in asset accounts?
When using T-accounts, which side is generally used to record increases in asset accounts?
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Liability accounts increase on the debit (DR) side of a T-account.
Liability accounts increase on the debit (DR) side of a T-account.
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What is the purpose of T-accounts?
What is the purpose of T-accounts?
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Financial information users prefer to see T-accounts instead of the Statement of Financial Position.
Financial information users prefer to see T-accounts instead of the Statement of Financial Position.
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What two types of information are needed from T-accounts to create a Statement of Financial Position?
What two types of information are needed from T-accounts to create a Statement of Financial Position?
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The Statement of Financial Position is created from the balances of ______.
The Statement of Financial Position is created from the balances of ______.
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On September 28, Sammy’s Skates sold skates for $45,000 and their cost was $25,000. What is the effect on retained earnings?
On September 28, Sammy’s Skates sold skates for $45,000 and their cost was $25,000. What is the effect on retained earnings?
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What type of account is 'Retained Earnings'?
What type of account is 'Retained Earnings'?
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A payment of $9,000 to pay back an amount owing on an account decreases cash and decreases accounts payable.
A payment of $9,000 to pay back an amount owing on an account decreases cash and decreases accounts payable.
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Cash is classified as a non-current asset.
Cash is classified as a non-current asset.
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Match the transactions with their effect on cash:
Match the transactions with their effect on cash:
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Study Notes
Accounting Toolkit: Making Changes to Account Balances
- Account Balances Change: Businesses change due to buying and selling, impacting the value of what they owe and own.
- T-accounts and Journal Entries: Two tools used to modify account values.
-
T-accounts: Shape like a 'T'; include asset, liability, and equity accounts.
- Top: Account name
- Sides: Numbers reflecting debits and credits.
- Debits: Left-hand side for assets.
- Credits: Right-hand side for liabilities and equity.
- Opening Balance: Account value before changes, reflecting what a business owns or owes.
- Asset Balances: Located on the left side of the T-account and are increased by debit entries.
- Liability & Equity Balances: Located on the right side of the T-account, and are increased by credit entries.
Example T-Account (Cash)
- Account Name: Cash
- Opening Balance: $1,234
- Debits (left): Increase in cash
- Credits (right): Decrease in cash
Additional Notes
- Natural balance for assets = debit
- Natural balance for liabilities and equity = credit
- Contra-accounts can reduce related asset account balances.
- Overdrawn cash accounts can be presented as liabilities, even though cash is an asset.
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Description
Test your knowledge on fundamental accounting principles and the accounting equation. This quiz covers topics like asset accounts, inventory transactions, and revenue recognition. Perfect for students in accounting courses or anyone interested in mastering the basics of accounting.
