Exam 2: Analyzing Transactions: the Accounting Equation

A(n)____________________ is a reduction in owner's equity as a result of the owner taking cash or other assets out of the business for personal use.

Expenses that are incurred in operating the enterprise increase owner's equity.

The accounting equation may be expressed as

From the following list of accounts,prepare an income statement,statement of owner's equity,and balance sheet for the year ended or at December 31,20--,for Milner's Star Express Cleaning Service. Cash \ 2,026 Fees Earned 13,835 Accounts Payable 7,530 D. Milner, Capital January 1, 20-- 6,000 D. Milner, Drawing 1,750 Utilities Expense 153 Prepaid Insurance 1,216 Rent Expense 1,200 Accounts Receivable 4,080 Equipment 15,290 Wages Expense 1,650

Stephen purchased office supplies for $800 on account.This transaction would

Which phase of the accounting process involves recognizing the effect of transactions on assets,liabilities,owner's equity,revenue,and expenses of a business?

The ____________________,sometimes called the profit and loss statement,reports the profitability of business operations for a specific period of time.

Match the terms with the definitions. -Reports beginning capital,plus net income,less withdrawals to compute ending capital.

Match the terms with the definitions. -Reports assets,liabilities,and owner's equity on a specific date.

Any accounting period of twelve months' duration is usually referred to as a(n)

The report which shows a firm's assets,liabilities,and owner's equity as of a specific date is called the ____________________.

A decrease in owner's equity may result from a(n)

Match the terms with the definitions. -The concept that nonbusiness assets and liabilities are not included in the business' accounting records.

Liabilities represent an "inside" interest in a business.

If owner's equity and liabilities increased during the period,then assets must also have increased.

Most businesses recognize ____________________ when earned,even if cash has not yet been received.

An accounts payable is an unwritten promise to pay a supplier for assets purchased or services rendered.

Match the terms with the definitions. -The excess of total revenues over total expenses for the period.

The income statement and statement of owner's equity provide information covering a period of time.

Since insurance lasts for several months,it is recorded as owner's equity.