Exam 1: Accounting and the Business Environment

Which of the following can be an effect of a transaction that increased an asset of a sole proprietorship for the accounting equation to balance?

Equity increases when revenues are earned.

Modern Designer Company is a sole proprietorship.The transactions for the first month of operations are as follows: • On June 1,2019,the owner,Cindee Litfin,contributed $25,000 cash to the business in exchange for capital. • On June 2,the company rendered services to three clients on account with total revenues earned of $9,000. • On June 5,the company incurred an advertising expense on four different web sites and promised to pay a total of $1,200 at a later date. • On June 13,Modern Designer purchased $1,000 worth of office supplies for cash.(The supplies are not used by June 30.) • On June 22,it received $2,000 on account from a client and deposited it into the business account. • On June 23,it incurred $1,300 for a legal expense and paid cash. • On June 30,Modern Designer made a payment of $500 to one of the web sites that it owed for advertising provided earlier in the month. • No withdrawals were made during the month. Required: 1.Prepare a transaction analysis of the transactions.Determine the effects of the transactions on the accounting equation. 2.Prepare an income statement and a statement of owner's equity for the month ended June 30,2019. 3.Prepare a balance sheet at June 30,2019.

GAAP refers to guidelines for accounting information in the United States.The acronym GAAP in this statement refers to ________.

An accounting firm collected cash on account.As a result of this transaction,assets and revenues increase.

John Tilden contributes cash to his business in exchange for capital.John is the sole proprietor.The two accounts involved in this transaction are ________.