Basic Accounting Practice And Definitions.

Cash is considered an asset because it represents the value of money or cash equivalents that a company has on hand. It is readily available to be used for transactions, paying off debts, or investing. As an asset, cash holds value and can be easily converted into other assets or used to generate income.

Current assets are assets that are expected to be converted into cash, sold, or consumed within a relatively short period of time, typically within 12 months. These assets include cash, accounts receivable, inventory, and prepaid expenses. By classifying assets as current, businesses can assess their liquidity and ability to meet short-term obligations. Therefore, the correct answer is 12 months.

In accounting, a T-account is a visual representation of a general ledger account. The left side of a T-account is known as the debit side, while the right side is the credit side. Debit entries are used to record increases in assets, expenses, and losses, while credit entries are used to record decreases in assets, revenues, and gains. Therefore, the left side of a T-account is always the debit side, making it the correct answer.

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In accounting, a T-account is a visual representation of an account where the left side is the debit side and the right side is the credit side. The credit side is used to record increases in liabilities, revenues, and equity accounts, while the debit side is used to record decreases in assets, expenses, and withdrawals. Therefore, the correct answer is "credit side" because it represents the side of the T-account where increases are recorded.

The correct answer is "telephone bill" because it is a payment made by the business for using telephone services. It is a regular expense that a business incurs to maintain communication and carry out its operations. This expense is typically recorded in the company's financial records and is considered a necessary cost for running the business.

The given answer is liabilities because liabilities are debts or obligations that a company owes to external parties. Notes payable, accounts payable, taxes payable, and salaries payable are all examples of such obligations. These represent the company's financial responsibilities that need to be fulfilled in the future.

The credit side of an account is the right side of the account. In accounting, a T-account is used to represent accounts, with the left side being the debit side and the right side being the credit side. When recording transactions, credits are used to increase liabilities, equity, and revenue accounts, while debits are used to increase assets and expense accounts. Therefore, the credit side of an account is the side where increases in these specific accounts are recorded.

The normal balance of the Accounts Payable account is credit because it is a liability account. Accounts Payable represents the amount of money owed by a company to its creditors or suppliers for goods or services received on credit. A credit balance in this account indicates that the company owes money to its creditors, which is a liability.

The normal balance of accounts receivable is a debit because it is an asset account. Accounts receivable represents the amount of money owed to a company by its customers for goods or services provided on credit. As an asset, it has a debit balance, meaning that an increase in accounts receivable is recorded as a debit entry. This helps to track the amount of money the company is owed and is considered an asset that can be converted into cash in the future.

When Meghan invests $30,000 in cash to start her business, it increases the assets of the business because cash is considered an asset. Additionally, it increases the owner's equity because Meghan's investment is considered her ownership stake in the business. Therefore, the correct answer is that this transaction would increase assets and increase owner's equity.

Purchasing supplies on account would increase total assets because supplies are considered an asset. Additionally, it would also increase total liabilities because the purchase is made on credit, resulting in an increase in accounts payable or a similar liability account. Therefore, both total assets and total liabilities would increase as a result of purchasing supplies on account.

A balance sheet is a financial statement that provides a snapshot of a company's financial position on a specific date. It shows the firm's assets, liabilities, and owners' equity, providing a clear picture of what the company owns (assets), what it owes (liabilities), and the remaining value for the owners (owners' equity). This statement helps stakeholders, such as investors and creditors, assess the company's financial health and make informed decisions. The other options listed, such as statement of operations, statement of owners' equity, and income statement, focus on different aspects of a company's financial performance and do not provide a comprehensive view of its financial position like a balance sheet does.

When a company pays cash to a creditor, it reduces its liabilities because it is fulfilling its obligation to pay the amount owed. This transaction does not affect revenues or expenses directly, as it is only related to the payment of a debt. Therefore, the correct answer is decreased liabilities.

A transaction refers to any event that has a financial impact on a business and can be measured. It involves the exchange of goods, services, or money between two parties. Transactions are recorded in the journal and later summarized in the income statement, which shows the financial performance of a business over a specific period. Therefore, a transaction is the correct answer as it encompasses all events that affect the financial position of a business.

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The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It lists the company's assets, liabilities, and stockholders' equity. Assets are the resources owned by the company, such as cash, inventory, and property. Liabilities are the company's debts and obligations, such as loans and accounts payable. Stockholders' equity represents the ownership interest in the company and is calculated by subtracting liabilities from assets. Therefore, the correct answer is assets, liabilities, and stockholders' equity.

When a business makes a sale on account, it means that the customer will pay for the product or service at a later date. In this scenario, the asset created is an account receivable. This represents the amount of money that the customer owes to the business and is recorded as an asset on the company's balance sheet. Account receivable is an important financial metric for businesses as it represents the amount of money that is expected to be received in the future.

The income statement is the financial statement that shows the state of a firm's revenue and expenses. It provides a summary of the company's financial performance over a specific period of time, typically a month, quarter, or year. The income statement helps to assess the profitability of the business by showing the net income or loss generated from its operations. It includes revenues, expenses, gains, and losses, and calculates the net income by subtracting expenses from revenues. This statement is crucial for investors, creditors, and other stakeholders to evaluate the financial health and profitability of the company.

When a business makes a purchase on account, it means that they are buying something and promising to pay for it at a later date. This creates a liability for the business, as they owe money to the supplier or vendor. This liability is recorded as a debit in the accounting system, and is called an account payable. Therefore, the correct answer is account payable.

The cash account is classified as an asset account because it represents the amount of cash that a company possesses. The normal balance of an asset account is a debit balance, meaning that increases in cash are recorded as debits and decreases in cash are recorded as credits. Therefore, the correct answer is "an asset account with a debit balance."

Based on the information given, we know that the beginning cash balance was $10,000 and the company received $8,000 in cash. We also know that the ending cash balance was $6,000. To find the cash payments for the month, we can subtract the ending cash balance from the sum of the beginning cash balance and cash received. Therefore, the cash payments for the month would be $10,000 + $8,000 - $6,000 = $12,000.

When a business purchases a truck by signing a note payable to the seller, it means that the business has agreed to pay the seller for the truck at a later date. This creates a liability for the business, as they owe the seller the amount stated in the note payable. Therefore, the correct answer is a credit to note payable, as it represents the increase in the business's liability.

This transaction would increase one asset and decrease another asset. When Stephen purchased office supplies for $800 in cash, it would increase the asset "office supplies" as he now owns $800 worth of supplies. However, it would also decrease the asset "cash" as he spent $800 in cash to make the purchase. Therefore, one asset (office supplies) increases and another asset (cash) decreases.

An account will have a debit balance if the amount of the debits exceeds the amount of the credits. This means that there have been more entries on the debit side of the account, indicating that more money has been debited or taken out of the account than has been credited or deposited into it. This results in a negative balance or a debit balance.

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When Jason purchased office equipment for $4,800 on account, it means that he acquired an asset (office equipment) which increases the total assets of the company. At the same time, since he made the purchase on account, it implies that he has a liability (accounts payable) to pay off the amount owed. Therefore, this transaction increases both the assets and liabilities of the company, ultimately affecting the owner's equity.

When a customer pays with a check on their account, it means they are making a payment towards their outstanding balance. This payment would be recorded as a credit to the Accounts Receivable account. Accounts Receivable represents the amount of money owed to the company by its customers. By receiving a check from a customer, the company is reducing the amount owed and therefore, a credit entry is made in the Accounts Receivable account.

Liabilities are debts payable to outsiders called creditors. This means that a liability represents an obligation or a debt that a company owes to external parties, such as suppliers, lenders, or other creditors. It is a financial obligation that the company is required to fulfill in the future, typically by making payments or providing goods or services. Liabilities are an important aspect of a company's financial position and are recorded on the balance sheet.

A fiscal year is an accounting period of twelve months duration that is commonly used by businesses and governments for financial reporting purposes. It does not necessarily align with the calendar year and can start at any point within the year. This term is widely recognized and used in the field of accounting and finance. A calendar year, on the other hand, refers to the twelve-month period starting from January 1st and ending on December 31st. A physical year and operating year are not commonly used terms in accounting and do not accurately describe the concept of a twelve-month accounting period.

The income statement should be completed first because it provides a summary of a company's revenues, expenses, and net income or loss for a specific period. It helps to determine the profitability of the business and provides important information for decision-making. The balance sheet and statement of financial position, on the other hand, provide a snapshot of the company's financial position at a specific point in time and require information from the income statement to calculate certain figures. Therefore, the income statement is usually prepared before the other financial statements.

The major types of transactions that affect retained earnings are revenues, expenses, and dividends. Revenues increase retained earnings as they represent the income generated by a company's primary activities. Expenses decrease retained earnings as they represent the costs incurred to generate revenue. Dividends, on the other hand, are distributions of earnings to shareholders and reduce retained earnings. Paid-in capital and common stock are related to equity financing and do not directly impact retained earnings. Assets and liabilities are balance sheet items and do not directly affect retained earnings. Revenues and liabilities are not the only types of transactions that affect retained earnings.

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Prepaid insurance is considered an asset because it represents an advance payment made by a company for insurance coverage that will be used in the future. As the coverage is used over time, it is gradually recognized as an expense on the income statement. However, at the time of payment, it is recorded as an asset on the balance sheet because it represents a future economic benefit to the company.

The payment for monthly rent of an office building would be recorded as a debit to rent expense. This is because rent expense is an operating expense that represents the cost of utilizing the office building for business operations. By debiting rent expense, the company is recognizing the cost incurred for using the office space during the month.

Revenues are recorded when the work is completed on the job, whether or not the cash is received. This is because revenue recognition is based on the completion of the performance obligation, which is the transfer of goods or services to the customer. The completion of the work signifies that the company has fulfilled its obligation and is entitled to recognize revenue. The timing of cash receipt does not affect the recognition of revenue as it may be received before or after the work is completed.

When a company receives cash in exchange for issuing stock, it increases its equity. Equity represents the ownership interest in the company, and when new stock is issued, it means that new owners have invested in the business. This increases the company's equity because the company now has more funds available for its operations and growth. It is important to note that this transaction does not impact expenses, revenues, or liabilities directly, as they are not directly related to the issuance of stock.

The payment of employee wages involves a cash outflow from the company, resulting in a decrease in cash. Additionally, this transaction represents an expense for the company as it incurs a cost in the form of wages paid to employees. Therefore, the transaction decreases cash and increases expenses.

Double-entry accounting is a system in which each transaction is recorded by debiting at least one account and crediting at least one account. This means that for every transaction, there will be an equal amount recorded on both the debit side and the credit side of the accounting equation. This ensures that the accounting equation remains balanced and accurate. By debiting and crediting different accounts, the system captures the flow of assets, liabilities, and equity throughout the accounting records.

The trial balance is a tool used to ensure that the total debits in the accounting system equal the total credits. This is important because in double-entry bookkeeping, every transaction has both a debit and a credit entry. If the total debits do not equal the total credits, it indicates that there is an error in the recording of transactions. Therefore, the trial balance helps to identify any discrepancies and ensures the accuracy of the financial records.

The accounting equation states that the value of a company's assets is equal to the sum of its liabilities and stockholders' equity. This equation is based on the fundamental principle of double-entry bookkeeping, which requires that every financial transaction have an equal and opposite effect on both sides of the equation. Therefore, if we subtract the liabilities from the assets, we are left with the stockholders' equity, representing the residual interest in the company's assets after deducting its liabilities.

The correct answer is statement of retained earnings. The statement of retained earnings shows the changes in a company's retained earnings over a specific period of time. It includes net income, as well as any dividends or other adjustments that affect retained earnings. Therefore, the amount of net income shown on the income statement is also reflected in the statement of retained earnings.

The entry to record the purchase of supplies on account would include a debit to Supplies. This is because when supplies are purchased on account, it increases the company's inventory of supplies, which is represented by the Supplies account. The debit entry increases the balance of the Supplies account, reflecting the increase in the company's assets. The other options, such as Accounts payable, Supplies Expenses, and Retained Earnings, are not relevant in this context and would not be debited in the entry.

The correct answer is "supplies consumed" because it refers to the cost of supplies that have been used up or consumed in the normal course of business operations. This expense is typically recorded on the income statement and represents the cost of materials or resources that are necessary to produce goods or provide services. It is important to track and account for supplies consumed in order to accurately calculate the cost of goods sold and determine the profitability of the business.

The chart of accounts is a listing of all the accounts that make up the ledger. It provides a systematic and organized structure for categorizing and classifying financial transactions. It helps in the efficient management of financial information by providing a clear overview of the different accounts and their balances. The chart of accounts is essential for accurate financial reporting and analysis.

Notes receivable due in 60 days would be classified as a current asset on the balance sheet. This is because current assets are those that are expected to be converted into cash or used up within one year or one operating cycle, whichever is longer. Since the notes receivable will be collected within 60 days, they are considered as a current asset.

When Jason paid $3,700 on account to the company, it means he is reducing the amount owed to the company, which decreases the liabilities. Additionally, since he is paying with cash, the assets are also decreasing. Therefore, this transaction would decrease assets and decrease liabilities.

When office furniture is purchased for cash, it means that the company is using its cash to buy the furniture. In accounting, a debit entry is made to the account that is receiving the benefit or the asset. In this case, the office furniture account is debited because it is the asset that the company is acquiring. Therefore, the correct answer is office furniture.

A trial balance is a statement that lists all the accounts in the ledger and their respective balances. It is prepared to ensure that the debits and credits in the accounting system are in balance. Therefore, the correct answer is "Totals for all accounts listed in the ledger" because a trial balance includes the balances of all accounts, whether they are balance sheet accounts or income statement accounts.

When office computers are purchased for cash, it means that cash is being used to pay for the computers. Therefore, there will be a decrease in the cash account, which is recorded as a debit. At the same time, there will be an increase in the office equipment account, which is recorded as a credit. This is because the company is acquiring new office equipment, which increases the value of the office equipment account.