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Exam 2: Analyzing Business Transactions

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Question 31

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The income statement is also known as the profit and loss statement.

A) True
B) False

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Question 32

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A business transaction is a financial event that affects the resources of a business.

A) True
B) False

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Question 33

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If a business receives $5,000 on account from clients who owed money for services previously billed, identify the effect on the accounting equation:

At the end of the first month of operations for Jackson's Catering Service, the business had the following accounts: Cash, $21,000; Prepaid Rent, $500; Equipment, $7,500 and Accounts Payable $4,000. By the end of the month, Jackson's had earned $32,000 of Revenues, and used $1,800 of Utilities Expenses, $4,000 of Rent Expense and $3,600 of Salaries Expenses. Calculate the net income to be reported by the company for this first month.

The balance sheet shows:

Examples of assets are:

The entire process of analyzing, recording, and reporting business transactions is based on the fundamental accounting equation.

The expenses for a period are reported on the balance sheet.

The financial interest of the owner in a business is called owner's equity or ________.

If a business issues a check for $100 to purchase office supplies, What is the effect on the accounting equation?

If a business issued a check for $1,000 to pay for two months rent in advance, what is the effect on the firms' assets, liabilities and owner's equity.

The following information should be used for questions. The transactions listed below took place at the Mitchell Advertising Agency. These transactions affected the following accounts. Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. $\begin{array}{|l|l|}\hline \text { Cash } & \text { K. Mitchell, Capital } \\\hline \text { Accounts Receivable } & \text { Revenue } \\\hline \text { Equipment } & \text { Expenses } \\\hline \text { Accounts Payable } & \\\hline\end{array}$ -Paid cash for utilities

Which of the following is an example of an expense:

Identify the account below that is classified as an asset account and would appear on the left side of the accounting equation.

The debts or obligations of a business are known as its ________.

When equipment is purchased for cash,

If the owner takes cash out of the business for personal use, the withdrawal should be recorded as an expense of the business.

The following information should be used for questions. On September 1, Shawn Dahl established Whitewater Rentals, a canoe and kayak rental business. The following transactions occurred in the month of September and affected the following accounts: $\begin{array}{|l|l|}\hline \text { Cash } & \text { Accounts Payable } \\\hline \text { Accounts Receivable } & \text { Shawn Dahl, Capital } \\\hline \text { Office Equipment } & \text { Revenue } \\\hline \text { Canoe and Kayak Equipment } & \text { Expenses } \\\hline\end{array}$ Transactions 1.Shawn Dahl invested $50,000 in cash to open the business 2.Paid $14,200 in cash for the purchase of kayak and canoe equipment 3.Paid $2,200 in cash for rent expense 4.Purchased additional kayak and canoe equipment for $4,900 on credit 5.Received $4,600 in cash for kayak rentals 6.Rented canoes and kayaks for $3,400 on account 7.Purchased office equipment for $375 in cash 8.Received $1,350 in cash from credit clients 9.Shawn Dahl withdrew $1,800 in cash for personal expenses -Based on the information shown in transaction #4 above, indicate the accounts affected and use plus and minus to show the changes caused by the transaction.

The account used to record amounts that will be collected from charge account customers in the future is referred to as ________ .

Amounts that a business must pay in the future are known as: