Accounting: Chapter 1

What is the Concept of Accounting?

Think Critically Everyone Loves Vocabulary

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Solving Equations

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Team 2 :Team 1 :

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Accounting Concepts: 2 Points

The Answer Is :Applied when a business’s financial information is recorded and reported separately from the owner’s personal financial information

The Question Is :What is the accounting concept Business Entity? Stop!

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The Answer Is :Unit of measurement

The Question Is :The accounting concept Unit of Measurement uses a common what?

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Accounting Concepts: 3 Points

The Answer Is :Applied when business transactions are stated in numbers that have common values – that is, using a common unit of measurement

The Question Is :What is the full definition for the accounting concept Unit of Measurement?

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Accounting Concepts: 4 Points

The Answer Is :So that the financial reports of businesses can be clearly stated and understood in numbers that have comparable values

The Question Is :Why is the accounting concept Unit of Measurement followed?

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Accounting Concepts: 5 Points

The Answer Is :Checking, business

The Question Is :An owner of a proprietorship must have two _________ accounts, one for personal expenses and another for the ___________.Stop!

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Accounting Concepts: 6 Points

The Question Is :

If I am the sole owner of my business, can I pay my personal car’s car note using the checking account of the business?

The Answer Is :No

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Accounting Concepts: 7 Points

The Question Is :I have to take money out of my business’s account to pay the rent on my personal apartment. Am I going to deduct the money (in the business’s accounting record) as “rent” or from the “cash (withdrawal)?”

The Answer Is :Cash (withdrawal)

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Accounting Concepts: 8 Points

The Answer Is :dollars

The Question Is :

What unit of measurement are business transactions recorded in, in the United States?

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Accounting Concepts: 9 Points

The Question Is :If the left side of the accounting equation is increased by $500, what will happen to the right side of the equation?

The Answer Is :It will increase by $500

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Critical Thinking: 2 Points

The Question Is :Why is it important to keep good accounting records?

The Answer Is :People such as suppliers who are extending credit and businesses extending loans will want to look at them. Poor accounting records lead to poor business decisions.

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Critical Thinking: 3 Points

The Question Is :How is owner’s equity affected when cash is received from sales?

The Answer Is :The amount of cash received will be added to the owner’s equity

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Critical Thinking: 4 Points

The Question Is :What are some of the advantages to owning a proprietorship?

The Answer Is :1. Ease of formation2. Total control by the owner3. Profits that are not shared

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Critical Thinking: 5 Points

The Question Is :How is the owner’s equity affected when services are sold on account?

The Answer Is :The amount of services sold will be added to the owner’s equity as revenue

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Critical Thinking: 6 Points

The Question Is :How is the owner’s equity affected when cash is paid for expenses?

The Answer Is :The amount of cash paid for expenses is deducted from the owner’s equity

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Critical Thinking: 7 Points

The Question Is :I just received $700 from someone that I provided services for last month. Where will I put this money in the equation?

The Answer Is :In the cash column, and in the owner’s Equity column (as revenue)

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Critical Thinking: 8 Points

The Question Is :

Explain the differences between assets, liabilities, and owner’s equity.

The Answer Is :

An asset is anything of value that is owned, because they can be used to acquire other assets or to operate business. Liability is the amount that a business owes to other people or businesses. The owner’s equity is what remains after the amount of all liabilities has been subtracted from the assets.

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Supply & Demand: 9 Points

The Answer Is :Planning, recording, analyzing, and interpreting financial information

The Question Is :What is the definition of the word “accounting?”

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Key Terms: 2 Points

The Answer Is :Financial statements

The Question Is :What are “financial reports that summarize the financial condition and operations of a business?”

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Key Terms: 3 Points

The Answer Is :Equities

The Question Is :What are “financial rights to the assets of a business?”

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Key Terms: 4 Points

The Answer Is :The account used to summarize the owner’s equity in a business

The Question Is :What is “capital?”

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Key Terms: 5 Points

The Answer Is :An increase in owner’s equity resulting from the operation of a business

The Question Is :What is “revenue?”

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Key Terms: 6 Points

The Answer Is :A sale for which cash will be received at a later date

The Question Is :What is a “sale on account?”

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Key Terms: 7 Points

The Answer Is :Applied when business transactions are stated in numbers that have common values – that is, using a common unit of measurement

The Question Is :What is the accounting concept Unit of Measurement?

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Key Terms: 8 Points

The Answer Is :An equation showing the relationship among assets, liabilities, and owner’s equity.

Assets = Liabilities + Owner’s Equity

The Question Is :What is the definition of “accounting equation?” What is the equation itself?

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Key Terms: 9 Points

Key Terms : 2 Points

The Question Is :A planned process for providing financial information that will be useful to management is called an __________ ____________.

The Answer Is :Accounting system

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The Answer Is :A business owned by one person, also known as a sole proprietorship

The Question Is :What is a proprietorship?

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Key Terms : 3 Points

The Question Is :Equities are financial _________ to the assets of a business.

The Answer Is :rights

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Key Terms : 4 Points

The Question Is :What are ethics? What are business ethics?

The Answer Is :Ethics are the principles of right and wrong that guide an individual in making decisions. Business ethics are the use of ethics in making business decisions.

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Key Terms : 5 Points

The Answer Is :A business activity that changes assets, liabilities, or owner’s equity

The Question Is :What is a transaction?

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Key Terms : 6 Points

The Answer Is :A sale for which cash will be received at a later date

The Question Is :What does “sale on account” mean?

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Key Terms : 7 Points

The Question Is :What is a withdrawal?

The Answer Is :Assets taken out of a business for the owner’s personal use

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Key Terms : 8 Points

The Answer Is :An account is a record summarizing all the information pertaining to a single item in the accounting equation. The name given to an account is called an account title.

The Question Is :What is an account? What is an account title?

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Key Terms : 9 Points

Solving Equations: 2 Points

The Question Is :Place a + or minus in the correct column (+ for increase, - for decrease): Received cash from owner as an investment.

The Answer Is :+ in assets and in owner’s equity

Trans. No. Assets Liabilities Owner’s Equity

1.

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The Question Is :Place a + or minus in the correct column (+ for increase, - for decrease): Paid cash for insurance.

The Answer Is :- In assets and in owner’s equity

Solving Equations: 3 Points

Trans. No. Assets Liabilities Owner’s Equity

1.

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The Answer Is :+ in liabilities

The Question Is :Place a + or minus in the correct column (+ for increase, - for decrease): Paid cash on account

Solving Equations: 4 Points

Trans. No. Assets Liabilities Owner’s Equity

1.

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The Answer Is :44,000

The Question Is :Fill in the empty column.

Solving Equations: 5 Points

Trans. No. Assets Liabilities Owner’s Equity

1. 95,000 51,000 ?

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The Answer Is :+ 1,600 in “Prepaid Insurance” & - 1,600 in “Cash”

The Question Is :Fill in the columns necessary: Paid cash for insurance - $1,600

Solving Equations: 6 PointsTrans.#

Assets = Liabilities + Owner’s Equity

Cash + Supplies + Prepaid Insurance +

Accts. Pay – F

Accts. Pay - R

Beg. Bal.

3,000

New Bal.

3,000

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The Answer Is :+ 900 in “Supplies”+ 900 in “Accts. Pay – F”

The Question Is :Fill in the columns necessary: Bought supplies on account from company “F” - $900

Solving Equations: 7 PointsTrans.#

Assets = Liabilities + Owner’s Equity

Cash + Supplies + Prepaid Insurance +

Accts. Pay – F

Accts. Pay - R

Beg. Bal.

3,000

New Bal.

3,000

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The Answer Is :- 300 in “Cash”- 300 in “Owner’s Equity”

The Question Is :Fill in the columns necessary: Paid cash to owner for personal use - $300

Solving Equations: 8 PointsTrans.#

Assets = Liabilities + Owner’s Equity

Cash + Supplies + Prepaid Insurance +

Accts. Pay – F

Accts. Pay - R

Beg. Bal.

625-300

375 300 200 1,100-300

New Bal.

325 375 300 200 800

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The Answer Is :Add 800 to “cash”; 1125Add 800 to “Owner’s Equity”; 1600

The Question Is :What columns will be affected, and what will the new balance be: Received cash from sales - $800

Solving Equations: 6 PointsTrans.#

Assets = Liabilities + Owner’s Equity

Cash + Supplies + Prepaid Insurance +

Accts. Pay – F

Accts. Pay - R

Beg. Bal.

625-300

375 300 200 1,100-300

New Bal.

325 375 300 200 800

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