Free Accounting Flashcards about Accounting Q1 & Q2


The asset Equipment will increase. However, the asset Cash will decrease by the same amount. The company’s asset account Cash decreased. The company’s asset account Cash will decrease. The company’s asset account Cash increases. The accounting equation is fundamental to the double-entry bookkeeping practice.


It shows, for each dollar of, what percentage was profit. This reference book takes you through all of the benefits and more in forming a business entity in Delaware. You’ll want to consider both methods and how they apply to your business before committing to one over the other. The above represent the overarching umbrella of accounting concepts. Once you master them, you are ready to tackle what day-to-day accounting involves. Enabling organizations to ensure adherence with ever-changing regulatory obligations, manage risk, increase efficiency, and produce better business outcomes.

Why Is the Accounting Equation Important?

When items are bought and paid for at a future date, another way to state this is to say these items are bought on account. When the owner withdraws cash from the business for personal use, this is called a ________ . When the company is eventually paid for services performed in the past, ________ .

Acquisition of any on credit. The shop purchased supplies for $900 by paying cash of $200 and charging the rest on account. Biffy repaired a boat for a customer. The customer paid cash of $1,300 for services rendered.

The Accounting Definition

These are recoverable from customers. And these are people to supply us. What is the meaning of owners Equity?

  • A decrease (-) to a liability account is a debit.
  • If depreciation expense is known, capital expenditure can be calculated and included as a cash outflow under cash flow from investing in the cash flow statement.
  • Long-term liabilities are usually owed to lending institutions and include notes payable and possibly unearned revenue.
  • Something owned by a business that has a ready market value.

D) capital divided by its total liabilities. A balance sheet has the _______ sections. Assets, liabilities, and stockholders’ equity income, expenses, and stockholders’ equity assets, liabilities, and income operating income, operating expenses, and stockholders’ equity. Use the “balance sheet equation” to determine owners’ equity if liabilities are $5 million and assets are $10 million. Use the accounting equation to calculate the value of liabilities if assets are $50,000 and owners’ equity is $25,000.

Things to Consider When Consolidating Debt for Your Small Business

Rates of Return – The balance sheet can be used to evaluate how well a company generates returns. This account includes the balance of all sales revenue still on credit, net of any allowances for doubtful accounts . As companies recover accounts receivables, this account decreases, and cash increases by the same amount. A company’s liabilities include every debt it has incurred.

  • This provides valuable information to creditors or banks that might be considering a loan application or investment in the company.
  • PB2.LO 2.1Each situation below relates to an independent company’s Owners’ Equity.
  • A double-entry bookkeeping system involves two different “columns;” debits on the left, credits on the right.
  • Credit and debit are the two fundamental aspects of every financial transaction in the double-entry bookkeeping system.
  • _____________________________________An area of accounting in which the accountant offers expert service to the general public.

You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. The major and often largest value asset of most companies be that company’s machinery, buildings, and property. These are fixed assets that are usually held for many years. Accounts receivableslist the amounts of money owed to the company by its customers for the sale of its products.

Fundamental Accounting Equation

On the left side of the balance sheet, companies list their assets. On the right side, they list their liabilities and shareholders’ equity. Sometimes balance sheets show assets at the top, followed by liabilities, with shareholders’ equity at the bottom. Rather than dealing with debits and credits, some businesses just record one side of the transaction, hence the term single-entry accounting system. In the above example, you would simply record the revenue amount of $1,500 in your sales journal. However, you would also want to make a separate entry in your accounts receivable ledger so you keep track of all customers that owe you money.

accounts receivable

And finally, liabilities are typically paid with Current assets. Which of the following groups of accounts have a normal credit balance? Assets, capital, and withdrawals.