Mame Wolly (eclest. ‘ss | os — vu Dining Accourting Tes | 22 Ps Taaiyzng Acountng Practons | 15 Ps. 1 Cag Wow Tasca harp an Acouring Eun | 48s. Determining How Transactions Change an Accounting Equation | 40 Ps TESTA = — Totat 725 Ps, Part One—Defining Accounting Terms a4 Directions: Select the one term in Column I that best fits each definition in Column Il Print the letter identifying your choice in the Answers column. Columat ‘Ac account ‘Beaceount balance Seearconetitie -Breccounting B-accounting equation -B-eecounting records —G--accounting system Hrastet A ursiness ethics j\—eapitat K, equities “Mrexpense —N--finamciatstatements: ‘O-tiability owner's equity. “Q. pioprictorship: -Rerevenue S_sale on account AB -service business AE TaTBAction Chapter 1—Test A L 3. 4 6 10, n 2. B 14 15, 16. vy. 18, 19, 20. 21. 2. g Column I “G Answers ‘The use of ethics in making business decisions. Planning, recording, analyzing, and interpreting financial information. ‘An equation showing the relationship among assets, liabilities, and owner's equity. A business activity that changes assets, liabilities, or owner's equity. . A planned process for providing financial information that will be uséful to management ‘The amount in an account. . The account used to summarize the owner's equity in the business. ‘The amount remaining after the value of all liabilities is, subtracted from the value of all assets. 9. Arecord summarizing all the information pertaining to a single item in the accounting equation. Organized summaries of a business's financial activities, Anything of value that is owned. ‘Assale for which cash will be received at a later date Assets taken out of a business for the owner's personal use. ‘An increase in owner’s equity resulting from the operation of a business business owned by one person. Financial rights to the assets of a business, A business that performs an activity for a fee. ‘The principles of right and wrong that guide an individual in making decisions Financial reports that summarize the financial conditions and operations of a business. ‘An amount owed by a business. ‘The name given to an account A decrease in owner’s equity resulting from the operation of a business. © South-Western Cengage Learning 21 m_H. m_S. BY. mR. 3. OQ. 16K wT. aL. oy 2» O. aC 2 M.Part Two—Analyzing Accounting Practices Directions: Place a T for True or an F for False in the Answers column to show whether each of the following statements is true or false. 10. 1, 2 13. 4. 15. A transaction for the sale of goods or services results in a decrease in owner’s equity. . When financial records for a business and for its owner's personal belongings arenot_ = &._T A=L+OE Answers . The accounting equation is most often stated as: Assets + Liabilities = Owner’s Equity. 1_f After each transaction, the accounting equation must remain in balance. T . Total assets are the amount the owner has invested in the business. TX . When two asset accounts are charged in a transaction, there must be an increase aT and a decrease Detailed information about changes in owner's equity is needed by owners and 5 ‘managers to make sound business decisions. When items are bought and paid for at a future date, another way to state this is to T say these items are bought on account. Or i mixed, this is an application of the Business Entity accounting concept. . An expense is a decrease in owner's equity resulting from the operation of a business. . TT The capita account she comer’s account w_f 7 r r + Fp Payments for advertising, equipment repairs, utilities, and rent are expense transactions. 11. Withdrawals are assets taken out of a business for the owner’s personal use. 2 ‘The most common type of withdrawal by an owner from a business is the B. withdrawal of cash. When an owner withdraws cash from the business, the transaction affects both “4. assetg and owner's equity. Awithdrawal is an expense. 15. Ul Century 21 Accounting, 9th Edition Chapter I—Test APart Three—Determining How Transactions Change an Accounting Equation Claudia Arellano is starting Arellano Consulting Services, a small service business, Arellano Consulting Services uses the accounts shown in the following accounting equation. Use the form below to record the following transactions. Use a plus sign (+) to indicate an increase and a minus sign (-) to indicate a decrease. Calculate new balances for all accounts after each transaction. Transactions 1, Received cash from owner as an investment, $15,000.00. 2. Paid cash for insurance, $5,000.00. 3, Bought supplies on account from Lee's Supplies, $1,600.00. 4. Paid cash on account to Lee's Supplies, 1,000.00. 5. Received cash from sales, $2,500.00. 6, Sold services on account to Jones Computers, $3,500.00. Assets {\= Liabilities + Owner's Equity ‘Transaction Accts. Rec. Prepaid Accts. Pay. Claudia Wo, Gash + Jones "+ Supplies + Insurance |)= Lee's + Arellano, Computers ‘Supplies Capital Beg. Bal. $0 $0 $0 30 30 $0 1 | 415,000 +45,000 | New Bal. 65,000 45,000 New Bal. *\,600 +\,600 New Bal, AO 4-000 - 1,00 Neve 2,600 : +2800 wen *3,500 +3500 New Bal. 11.500 00 1,600 5, 000)| G00 21,000 ~ aye0o “= [~~ |e Chapter I—Test A © South-Western Cengage LearningPart Four—Determining How Transactions Change an Accounting Equation Continue to record transactions for Arellano Consulting Services, using the accounts shown in the following accounting equation. Use the form below to record the following transactions. Use a plus sign (+) to indicate an increase and a minus sign (-) to indicate a decrease. Calculate new balances for all accounts after each transaction. Transactions °F, Paid cash for supplies, $750.00. “8. Paid cash for rent, $1,100.00. 9/ Paid cash to owner for personal use, $1,500.00. 10. Paid cash for telephone bill, $250.00 11. Received cash on account from Jones Computers, $2,000.00. Assets Liabilities + Owner's Equity Transaction ‘Accts. Rec. Prepaid ee Pay, Clautia Wo. Cash + “Jones” + Supplies + insurance 11) Lee's + Arellano, Computers Supplies Capital Beg. Bal. $11,500 $3,500 $1,600 $5,000 $600 $21,000 7-750 2780 NewBal 4 100 =1,100 New Bal, 0) “L400 -1,500 New Bal. os - “to 728 7250 New Bal... 3 Mm *a,UG0 -aco0 New Ba 9400 1.500 2.350 S00 MeO 1g 150] “e750 VO 1g ZG 4 Century 21 Accounting, 9th Edition Chapter 1—Test A