Podcast
Questions and Answers
Which of the following best describes Retained Earnings?
Which of the following best describes Retained Earnings?
- Earnings of only the current week
- Earnings from past accounting periods (correct)
- Earnings that are still pending
- Earnings from the upcoming week
When was the Ending Balance Sheet prepared?
When was the Ending Balance Sheet prepared?
- At the end of last week (correct)
- At the end of the current week
- At the beginning of week number 2
- During the first week of business
What happens to last week’s Ending Inventory as the new week begins?
What happens to last week’s Ending Inventory as the new week begins?
- It is merged with current Inventory
- It becomes the Ending Inventory for this week
- It is discarded from the records
- It is now considered Beginning Inventory (correct)
What must be done with last week's earnings when creating the new Balance Sheet?
What must be done with last week's earnings when creating the new Balance Sheet?
What are the two main outcomes for earnings in a business?
What are the two main outcomes for earnings in a business?
How are earnings updated at the beginning of a new week?
How are earnings updated at the beginning of a new week?
What did the banker's response imply when asked if they give loans to kids?
What did the banker's response imply when asked if they give loans to kids?
How much cash did the business owner claim to have in their balance sheet?
How much cash did the business owner claim to have in their balance sheet?
What was the total amount of sales reported for the previous week?
What was the total amount of sales reported for the previous week?
What was the gross profit mentioned in the scenario?
What was the gross profit mentioned in the scenario?
How much cash did the banker loan?
How much cash did the banker loan?
Which account reflects the amount owed to the banker?
Which account reflects the amount owed to the banker?
What was the return on investment after selling the lemonade?
What was the return on investment after selling the lemonade?
What happened to the inventory when the lemonade was sold to the friend?
What happened to the inventory when the lemonade was sold to the friend?
How much cash was added after selling the lemonade to the friend?
How much cash was added after selling the lemonade to the friend?
Did the sale of lemonade generate profit?
Did the sale of lemonade generate profit?
Will the lemonade sale transaction appear on the Income Statement?
Will the lemonade sale transaction appear on the Income Statement?
What is suggested to be included in the Income Statement at the end of the week?
What is suggested to be included in the Income Statement at the end of the week?
What is indicated by checking if the financial results are in balance?
What is indicated by checking if the financial results are in balance?
Study Notes
Lemonade Stand Accounting
- The lemonade stand owner starts the week with a beginning inventory of lemonade, which was the ending inventory from the previous week.
- The owner also has retained earnings from the previous week, which are earnings from past accounting periods.
- The owner takes out a loan from a bank, increasing cash and creating Notes Payable (liability).
- The owner sells remaining inventory for cash to a friend at cost, reducing inventory and increasing cash.
- The owner purchases sugar on credit from the grocery store, increasing inventory and creating Accounts Payable (liability).
- Notes Payable is a liability for money borrowed from a bank, and Accounts Payable is a liability for goods or services purchased on credit.
- Notes Payable is typically long-term, while Accounts Payable is short-term.
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Description
Test your knowledge on basic accounting principles through the scenario of a lemonade stand. This quiz covers concepts such as inventory management, liabilities, and cash flow. Understand how retained earnings, loans, and purchasing on credit affect a small business's finances.
