Question 1

Martin Supply Service received $1 000 cash from a customer which was owed to the business from the previous month.What is the effect of the cash receipt on the accounts of the business?

Accepted Answer

The cash receipt of $1,000 increases the Cash account. This cash receipt is for a customer that owed the business from the previous month, therefore the Accounts receivable decreases. So, Cash account increases; Accounts receivable decreases.

Question 2

Equipment is sold for cash in an amount equal to the cost of the equipment recorded on the books.How does this sale affect the accounting equation?

Accepted Answer

The answer of Equipment is sold for cash in an...

Question 3

Tim contributes capital into his business.The two accounts affected are:

Accepted Answer

When Tim contributes capital into his business, he is increasing the assets of the business (cash, for example) and increasing his ownership in the business, which is an owners' equity account. Therefore, the two accounts affected are an asset account and an owners' equity account.

Question 4

A business performs services for its customers.Payment is expected to be received next month.How does the performance of services affect the accounting equation?

Accepted Answer

When a business performs services for its customers, it increases its accounts receivable (an asset) and earns revenue, which increases owners' equity. This can be represented in the accounting equation as follows: Assets increase (+A), and owners' equity also increases (+OE). Therefore, the correct choice is A - Assets increase; owners' equity increases.

Question 5

Hamilton Lawn Service incurred an $800 repair expense and paid the repair company in cash.Which account,besides Cash,decreased?

Accepted Answer

The answer of Hamilton Lawn Service incurred an $800 repair...

Question 6

Owner's drawings are the expenses of a business.

Accepted Answer

Owner's drawings are not expenses of a business. They are the funds that the owner withdraws from the business for personal use. Expenses are the costs incurred by the business in order to generate revenue.

Question 7

Equity increases when revenues are earned.

Accepted Answer

Equity is the residual interest in the assets of an entity after deducting liabilities. When revenues are earned, they increase the assets of the entity, which in turn increases its equity.

Question 8

A proprietor makes a cash withdrawal from the proprietorship.How does this affect the accounting equation?

Accepted Answer

When a proprietor makes a cash withdrawal, the assets decrease (cash) and the owners' equity decreases (since the owner is taking money out of the business). This is reflected in the accounting equation as follows:
Assets = Liabilities + Owners' Equity
Decrease in cash (asset) = No effect on liabilities + Decrease in owners' equity (withdrawal by proprietor)

Question 9

Joe purchased office equipment for $1 250 cash.What is the effect on accounts?

Accepted Answer

The answer of Joe purchased office equipment for $1 250...

Question 10

Hamilton Lawn Service earned $1 000 for services rendered.The customer promised to pay at a later time.What is the effect on accounts?

Accepted Answer

The answer of Hamilton Lawn Service earned $1 000 for...

Question 11

A business settles a liability by making a payment with cash.How does paying this liability affect the accounting equation?

Accepted Answer

The answer of A business settles a liability by making...

Question 12

Ace Ltd had the following transactions in June: sold goods for $2000 on account; received cash on account,$4000; paid $600 for repair expense; paid $2000 to a supplier that it owed from the previous month.What is the combined effect on Cash of the June transactions?

Accepted Answer

- The revenue from selling goods on account does not affect cash.
- Receiving cash on account increases cash by $4000.
- Paying $600 for repair expense decreases cash by $600.
- Paying $2000 to a supplier decreases cash by $2000.
Net effect on cash = $4000 - $600 - $2000 = $1400 increase.

Question 13

The proprietor of Martin Supply Service took a $5 000 cash withdrawal.What is the effect of the withdrawal on the accounts of the business?

Accepted Answer

The withdrawal of cash by the proprietor would result in a decrease in the cash account as cash has gone out of the business. Additionally, the withdrawal would result in a decrease in the Owners' capital account as the proprietor has taken out money from the business, which belongs to the owner.

Question 14

A business receives a bill for services rendered from one of its suppliers.The business will pay the supplier next month.When the business receives the bill from its supplier,how does this affect the accounting equation?

Accepted Answer

When the business receives the bill from its supplier, it incurs a liability because it owes the supplier for services rendered. This increases the liabilities of the business. However, there is no change in the assets of the business, so the owners' equity decreases to balance the equation. This is reflected in the accounting equation as: Assets = Liabilities + Owners' Equity.

Question 15

A $5 000 account payable is paid by the business.How is the accounting equation affected?

Accepted Answer

When a business pays a $5,000 account payable, it decreases its liability (accounts payable) by $5,000, and decreases its assets (cash) by an equal amount, thus maintaining the accounting equation in balance. Therefore, option A is the correct answer.

Question 16

Hamilton Lawn Service earned $1 000 for services rendered and collected cash from its customer.What is the effect on accounts?

Accepted Answer

The answer of Hamilton Lawn Service earned $1 000 for...

Question 17

Equity decreases with expenses and revenues.

Accepted Answer

Equity is affected by changes in revenue and expenses, but it does not decrease with both. If revenues increase more than expenses, then equity will increase. If expenses increase more than revenues, then equity will decrease.

Question 18

The business receives cash from a customer that is owed to the company 'on account',based on services rendered to the customer previously.How does the collection of the cash affect the accounting equation?

Accepted Answer

When the business receives cash from a customer that is owed 'on account', the asset cash increases and the asset accounts receivable decreases. Hence, one asset increases and one asset decreases, resulting in option A being the correct choice.

Question 19

Martin Supply Service paid $350 cash to a materials supplier that it owed from the previous month.What is the effect of the cash payment on account of the business?

Accepted Answer

The answer of Martin Supply Service paid $350 cash to...

Question 20

Venus Ltd paid $10,000 for an account payable.How does this transaction affect the accounting equation of Venus?

Accepted Answer

When Venus Ltd pays $10,000 for an account payable, it means that they are reducing their liabilities, which in turn reduces their assets. Therefore, assets decrease by $10,000 and liabilities decrease by $10,000.

Quiz 1: The Role of Accounting in Decision Making

Martin Supply Service received $1 000 cash from a customer which was owed to the business from the previous month.What is the effect of the cash receipt on the accounts of the business?

Equipment is sold for cash in an amount equal to the cost of the equipment recorded on the books.How does this sale affect the accounting equation?

Tim contributes capital into his business.The two accounts affected are:

A business performs services for its customers.Payment is expected to be received next month.How does the performance of services affect the accounting equation?

Hamilton Lawn Service incurred an $800 repair expense and paid the repair company in cash.Which account,besides Cash,decreased?

Owner's drawings are the expenses of a business.

Equity increases when revenues are earned.

A proprietor makes a cash withdrawal from the proprietorship.How does this affect the accounting equation?

Joe purchased office equipment for $1 250 cash.What is the effect on accounts?

Hamilton Lawn Service earned $1 000 for services rendered.The customer promised to pay at a later time.What is the effect on accounts?

A business settles a liability by making a payment with cash.How does paying this liability affect the accounting equation?

Ace Ltd had the following transactions in June: sold goods for $2000 on account; received cash on account,$4000; paid $600 for repair expense; paid $2000 to a supplier that it owed from the previous month.What is the combined effect on Cash of the June transactions?

The proprietor of Martin Supply Service took a $5 000 cash withdrawal.What is the effect of the withdrawal on the accounts of the business?

A business receives a bill for services rendered from one of its suppliers.The business will pay the supplier next month.When the business receives the bill from its supplier,how does this affect the accounting equation?

A $5 000 account payable is paid by the business.How is the accounting equation affected?

Hamilton Lawn Service earned $1 000 for services rendered and collected cash from its customer.What is the effect on accounts?

Equity decreases with expenses and revenues.

The business receives cash from a customer that is owed to the company 'on account',based on services rendered to the customer previously.How does the collection of the cash affect the accounting equation?

Martin Supply Service paid $350 cash to a materials supplier that it owed from the previous month.What is the effect of the cash payment on account of the business?

Venus Ltd paid $10,000 for an account payable.How does this transaction affect the accounting equation of Venus?