Exam 1: Accounting in Action

If a company reported a loss in the first month of operations, the loss would reduce owner's capital and would be

One of the main advantages of a corporation is the limit of liability for the shareholders of the company.

An obligation to pay cash to a supplier in the future is called accounts payable.

Presented below is a balance sheet for the Marks Lawn Service at December 31, 2013. The following additional data are available for the year which began on January 1, 2013: All expenses (excluding supplies expense) total $6,000. Supplies on January 1, were $11,000 and $3,000 of supplies were purchased during the year. Profit for the year was $8,000 and drawings were $5,000. Instructions Determine the following: (Show all calculations.) a. Supplies used during the year. b. Total expenses for the year. c. Service revenues for the year. d. Bill Marks' capital balance on January 1.

The accounting equation, for a proprietorship, may be expressed as

A cash flow statement is organized into three categories, operating, financing and investing activities of the company.

An investment by a company's owner increases a company's cash and

Owner's claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses.

Assets are current obligations, arising from past events, to make a future payment or to provide services.

In each of the following situations, the accountant for Sydney Design Services (Sydney) must decide how to record the information in the financial statements. Sydney is a proprietorship owned and operated by Gloria Steinwald. 1. In April, Sydney purchased some furniture that will be used in a client's newly designed office. Sydney paid $4,000 for the furniture, and the client will pay Sydney $5,600 when it is delivered and assembled in May. The accountant wants to know at which amount the furniture should be reported on the April 30 balance sheet. 2. In June, Sydney signed a long-term contract with a hotel chain to review all of their hotels' décor annually and recommend updates as fashions change. The fees will be based on the amount of time spent on the annual review. The first location will be evaluated starting in September. The accountant believes this contract is of great value to Sydney even though no money has changed hands yet, and wonders how it can be shown in the June 30 financial statements. Instructions For each of the situations, identify which generally accepted accounting principle would guide the accountant in deciding how to report the situation, and describe the correct treatment.

Expenses do not have to be paid in cash at the time they are incurred. When payment is made on the later date, the liability accounts payable account will decrease and the asset

The cost principle requires that when assets are acquired, they be recorded at

Which of the following would NOT be considered an internal user of accounting data for the ABC Company?

One of the disadvantages of a proprietorship is that there is unlimited liability for the owner.

Generally accepted accounting principles are

In a proprietorship, owner's equity is affected by all of the following EXCEPT

A balance sheet, in a proprietorship, shows

Only the accountants should be concerned with ethics when the financial statements are being prepared.

Both IFRS and ASPE are considered "principles-based" as opposed to "rules-based" standards.

Jackson's Small Engine Repair Shop, a proprietorship, started the year with total assets of $60,000 and total liabilities of $40,000. During the year, the business recorded $100,000 in repair revenues, $55,000 in expenses, and Mike Jackson, the owner, withdrew $10,000. Jackson's Capital balance changed by what amount from the beginning of the year to the end of the year?