Acct 1 Ch.1-2

A purchase of supplies on credit has what effect on the accounting equation?

increases assets; increases liabilities

Which of the following financial statements reports information as of a specific date?

balance sheet

The assets and liabilities of a company are $128,000 and $84,000, respectively. Owner's equity should equal

$44,000

Which of the following would not normally operate as a service business?

grocery store

Debts owed by a business are referred to as

liabilities

The accounting equation may be expressed as

Assets − Liabilities = Owner's Equity

If total liabilities decreased by $46,000 during a period of time and owner's equity increased by $60,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is a

$14,000 increase

A business paid $7,000 to a creditor for an amount owed. The effect of the transaction on the accounting equation was to

decrease an asset; decrease a liability

Earning revenue

increases assets; increases owner's equity

The monetary value earned for selling goods or services to customers is called 

revenue

Accounts payable are accounts that you expect will be paid to you.

False

A drawing account represents the amount of withdrawals made by the owner.

True

Sonny Miller, Drawing is an expense account.

False

The increase side of an account is also the side of the normal balance.

True

The normal balance of revenue accounts is a credit.

True

A debit signifies a decrease in

revenues

Unearned revenues are an example of a liability.

True

The accounts in the ledger of Nilles Consulting Co. are listed as follows. All accounts have normal balances.When the trial balance is prepared, the total of the credits will be

$26,200

During May, $245,000 was paid to creditors on account, and purchases on account were $210,500. Assuming the May 31 balance of Accounts Payable was $62,800, what was the account balance on May 1? 

$97,300

The process of transferring debits and credits from journal entries to the accounts is called

posting

Which of the following is the best explanation for this journal entry?

Purchased equipment; paid cash of $5,000, with the remainder to be paid in the future.

What effects does this journal entry have on the accounts?

decrease Accounts Payable and decrease Cash