The Accounting Equation and Transaction Analysis

What is an accounting cycle?

A summary of all accounts in a company
A collective process of identifying, analyzing, and recording the accounting events of a company
Transaction recording process
Any business activity or event that results in a direct effect on the financial status and financial statements of the business

Which of the followings is an accounting transaction?

Purchase of property, plant, and equipment
Sales in cash and credit
Receipt of cash from a customer
All mentioned above

What does the accounting equation show?

The sum of a company’s liabilities and shareholders’ equity are equal to its total assets
The total liabilities of the company are equal to the sum of shareholders’ equity and its total assets
The sum of a company’s assets and liabilities is equal to its shareholders’ equity
The sum of a company’s assets is equal to the difference between its total liabilities and shareholders’ equity

What are assets?

Amounts owed to outsiders
Owner’s share in a business
Properties that are owned and have money value
Any debts the company has

What are liabilities?

Amounts owed to outsiders
Owner’s share in a business
Properties that are owned and have money value
Sales to customers on credit that must be paid in the short-term period

What is shareholders’ equity?

Amounts owed to outsiders
Owner’s share in a business
Properties that are owned and have money value
Sales to customers on credit that must be paid in the short-term period

Which of the followings is an asset in a company?

Notes payable
Profit
Accounts payable
Inventory

Which of the followings is a liability of a company?

Cash and cash equivalents
Equipment
Accounts payable
Inventory

What are accounts receivable?

Sales to customers on credit that must be paid in the short term
Salable goods and materials a company has on hand
Payments the company owes
Marketable securities, such as stocks, bonds and other types of securities

What are accounts payable?

Salable goods and materials a company has on hand
Payments the company owes
Sales to customers on credit that must be paid in the short term
Marketable securities, such as stocks, bonds and other types of securities

Which of the following statements is true?

After every transaction what the company owns, is larger than what the company owes
After every transaction what the company owns, is equal to what the company owes
After every transaction what the company owns, is smaller than what the company owes
After every transaction what the company owns, is equal to the shareholder’s equity of the company

The company bought inventory on credit, $100. How will this transaction effect the accounting equation?

The assets will decrease by $100 and the liabilities will increase by $100
The assets will increase by $100 and the shareholders’ equity will decrease by $100
The assets will increase by $100 and the liabilities will also increase by $100
This transaction will not change the accounting equation

Jack invested $5,000 to open a marketing company. How will this transaction effect the accounting equation?

The assets will increase by $5,000 and the shareholders’ equity will increase by $5,000
The assets will increase by $5,000 and the shareholders’ equity will decrease by $5,000
The assets will increase by $5,000 and the liabilities will also increase by $5,000
This transaction will not change the accounting equation

The company bought office supplies with cash, $300. How will this transaction effect the accounting equation?

The assets will increase by $300 and the shareholders’ equity will increase by $300
The assets will increase by $300 and the liabilities will decrease by $300
The assets will decrease by $300 and the liabilities will increase by $300
This transaction will not change the accounting equation

The company earned $2,000 in fees. How will this transaction effect the accounting equation?

This transaction will not change the accounting equation
The assets will increase by $2,000 and the shareholders’ equity will increase by $2,000
The assets will increase by $2,000 and the liabilities will decrease by $2,000
The assets will decrease by $2,000 and the liabilities will increase by $2,000

The Accounting Equation and Transaction Analysis

The Accounting Equation and Transaction Analysis

icarus July 9, 2024

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