Acconting Principles
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Chapter 1
Accounting and the Business Environment
Short Exercises
(5 min.) S 1-1
Revenues increase owner’s equity by delivering goods or services to customers.
Expenses decrease owner’s equity by using up assets or increasing liabilities in order to deliver goods or services to customers.
(5 min.) S 1-2
1. The banker is an external user of financial information.
2. The financial statement that would provide the best information to answer the banker’s questions is the balance sheet.
(5 – 10 min.) S 1-3
This organization is the Financial Accounting Standards Board.
(5 – 10 min.) S 1-4
Claire’s needs will best be met by organizing a corporation.
(5 – 10 min.) S 1-5
1. c 2. b 3. d 4. a
(5-10 min.) S 1-6
1. a. the entity concept b. the cost principle c. the stable-monetary unit concept d. the reliability principle
2. Wendy Craven has $13,000 of equity in the business.
Assets | = | Liabilities | + | Owner’s Equity | | | | | | | | Accounts | | Craven, | Cash + Furniture | = | Payable | + | Capital | | | | | | $6,000 + $12,000 | = | $5,000 | + | $13,000 | (5 min.) S 1-7
| Assets | = | Liabilities + Owner’s Equity | | | | | | | | | | | | | | Cash | | | Owner, Capital | | | | | | | | (a) | $420 | = | | $420 | Revenue | (b) | − $135 | = | | − $135 | Expense |
(5 min.) S 1-8
Monte Hall Gaming recorded no liability for the purchase of land because the business paid for the land with cash. The business has no debt—no liability—to make a future payment for the land.
(5 min.) S 1-9
Cash: | $ -0- | | | Total assets (accounts receivable): | $2,400 |
(5 min.) S 1-10
1. The business recorded no revenue when it collected cash on account because it
Chapter 1
Accounting and the Business Environment
Short Exercises
(5 min.) S 1-1
Revenues increase owner’s equity by delivering goods or services to customers.
Expenses decrease owner’s equity by using up assets or increasing liabilities in order to deliver goods or services to customers.
(5 min.) S 1-2
1. The banker is an external user of financial information.
2. The financial statement that would provide the best information to answer the banker’s questions is the balance sheet.
(5 – 10 min.) S 1-3
This organization is the Financial Accounting Standards Board.
(5 – 10 min.) S 1-4
Claire’s needs will best be met by organizing a corporation.
(5 – 10 min.) S 1-5
1. c 2. b 3. d 4. a
(5-10 min.) S 1-6
1. a. the entity concept b. the cost principle c. the stable-monetary unit concept d. the reliability principle
2. Wendy Craven has $13,000 of equity in the business.
Assets | = | Liabilities | + | Owner’s Equity | | | | | | | | Accounts | | Craven, | Cash + Furniture | = | Payable | + | Capital | | | | | | $6,000 + $12,000 | = | $5,000 | + | $13,000 | (5 min.) S 1-7
| Assets | = | Liabilities + Owner’s Equity | | | | | | | | | | | | | | Cash | | | Owner, Capital | | | | | | | | (a) | $420 | = | | $420 | Revenue | (b) | − $135 | = | | − $135 | Expense |
(5 min.) S 1-8
Monte Hall Gaming recorded no liability for the purchase of land because the business paid for the land with cash. The business has no debt—no liability—to make a future payment for the land.
(5 min.) S 1-9
Cash: | $ -0- | | | Total assets (accounts receivable): | $2,400 |
(5 min.) S 1-10
1. The business recorded no revenue when it collected cash on account because it