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Accounting midterm

Terms in this set (138)

Which business sector is the following business or individual most likely to be in? Clothing patternmaker
1. Tertiary
2. Secondary
3. Primary
2) secondary
Which business sector is the following business or individual most likely to be in? Historian, who teaches and does research
1. Tertiary
2. Secondary
3. Primary
1. Tertiary
Which business sector is the following business or individual most likely to be in? Economist
1. Tertiary
2. Secondary
3. Primary
1. Tertiary
Which qualitative characteristic or assumption is best represented by the following statement?
Businesses will continue their operations into the future.
1)understandable
2) unit-of-measure
3) relevant
4) separate entity
5) comparable
6) verifiable
7) full disclosure
8) time period
9) faithful
10) historic cost
11) going concern
11) going concern
Which qualitative characteristic or assumption is best represented by the following statement?
Three people looking at the information would all determine the same amount or similar.
1)understandable
2) unit-of-measure
3) relevant
4) separate entity
5) comparable
6) verifiable
7) full disclosure
8) time period
9) faithful
10) historic cost
11) going concern
6) verifiable
Which qualitative characteristic or assumption is best represented by the following statement? Information is categorized so as to be clear and concise.
1) understandable
2) unit-of-measure
3) relevant
4) separate entity
5) comparable
6) verifiable
7) full disclosure
8) time period
9) faithful
10) historic cost
11) going concern
1) Understandable
Choose the stakeholder that is MOST likely to ask the following question. Does this business pay regular dividends?
1) Customer
2) Management (Retailer)
3) Canada Revenue Agency
4) Lender (banker)
5) Supplier (Wholesaler)
6) Business owner
6) Business owner
Choose the stakeholder that is MOST likely to ask the following question. What was the effect of the last T.V. advertising on sales?
1) Lender (banker)
2) Canada Revenue Agency
3) Management (Retailer)
4) Supplier (Wholesaler)
5) Customer
6) Business owner
4) Lender (banker)
1. Provide the missing number in the following equation. Enter only the digits - no dollar signs, commas, decimal points, or pennies.
Owner's Capital = 45174
Retained Earnings = 56468
Equity ?
101642
2. What is the effect of the following transaction on the basic accounting equation?
Received cash of $3,400 from customers for services provided
1) Assets decrease, owners' equity decreases.
2) Liabilities decrease, owners' equity increases.
3) Assets increase, assets decrease.
4) Assets increase, liabilities increase.
5) Assets increase, owners' equity increases.
6) No entry, no effect.
7) Assets decrease, liabilities decrease.
8) Liabilities increase, owners' equity decreases
5) Assets increase, owners' equity increases.
3. What is the effect of the following transaction on the basic accounting equation?
Customers paid $1,400 cash for services provided.
1) Assets increase, assets decrease.
2) Assets increase, owners' equity increases.
3) Liabilities decrease, owners' equity increases.
4) No entry, no effect.
5) Assets increase, liabilities increase.
6) Assets decrease, liabilities decrease.
7) Assets decrease, owners' equity decreases.
8) Liabilities increase, owners' equity decreases.
2) Assets increase, owners' equity increases.
4. What is the effect of the following transaction on the basic accounting equation?
Paid interest on the loan from the bank, $120, cash.
1) Liabilities decrease, owners' equity increases.
2) No entry, no effect.
3) Liabilities increase, owners' equity decreases.
4) Assets increase, assets decrease.
5) Assets increase, liabilities increase.
Incorrect Response
6) Assets decrease, liabilities decrease.
7) Assets increase, owners' equity increases.
Correct Answer
8) Assets decrease, owners' equity decreases
8) Assets decrease, owners' equity decreases.
5. Provide the missing numbers in the following data. Enter only the digits - no dollar signs, commas, decimal points, plus signs, or pennies. Use a minus sign if the change is negative.
Beginning of the period:
Assets = 101642
Liabilities = 45174
Equity =___?___(50 %)
Change in the period:
Assets =___?___(50 %)
Liabilities = -12400
Equity = 18200
End of the period:
Assets = 107442
Liabilities = 32774
Equity = 74668
Equity =___56468___
Change in the period:
Assets =___5800___
A company pays $600 plus HST for three moths' rent on its office on November 1, 2021. How much is its rent expenses for the year ended December 31, 2021?
...
On ob=ctober 1, a customer pays your company $800 for four moths of services ( October through January). By the end of the year, december 31, how much revenue will you have recorded
...
Price the missing number in th eoloowing equation. Owners captial = 114150, Retained earning = ? Equity = 256838
...
Which business sector is the following business or individual most likely to be in? The brick
...
Which business sector is the following business or individual most likely to be in? Mavchanist at the Honda facotry
...
Which busienss sector is the individual most liekly to be in - Lawyer
...
Indicate wheather the business activty is an event or a transaction. ourcahsed business cards using a business credit card
...
Event or transaction? - Signed a contract to purchase new equipment. The effective date is next month
...
What is the effect of the following transaction on the basic accounting equation? Paid your credit card bill of $2,500
1) Liabilities decreases, owners equity increase
2) Assets decrease, owners equity decreases
3) Assets increase, asset decrease
4) no entry, no effect
5) liabilities increase, owners equity decreases
6) assets decrease, liabilities decrease
7) assets increase liabilities increase
8) asset increase, owners equity increases
...
What is the effect of the following transaction on the basic accounting equation? Paid for the use of a business cell phone, $80 plus HST
1) Liabilities decreases, owners equity increase
2) Assets decrease, owners equity decreases
3) Assets increase, asset decrease
4) no entry, no effect
5) liabilities increase, owners equity decreases
6) assets decrease, liabilities decrease
7) assets increase liabilities increase
8) asset increase, owners equity increases
...
What is the effect of the following transaction on the basic accounting equation? received cash of $3,400 from customers for service provided
1) Liabilities decreases, owners equity increase
2) Assets decrease, owners equity decreases
3) Assets increase, asset decrease
4) no entry, no effect
5) liabilities increase, owners equity decreases
6) assets decrease, liabilities decrease
7) assets increase liabilities increase
8) asset increase, owners equity increases
...
What is the effect of the following transaction on the basic accounting equation? Paid utility cost of $800 for utility usage to date
1) Liabilities decreases, owners equity increase
2) Assets decrease, owners equity decreases
3) Assets increase, asset decrease
4) no entry, no effect
5) liabilities increase, owners equity decreases
6) assets decrease, liabilities decrease
7) assets increase liabilities increase
8) asset increase, owners equity increases
...
Which accounts are affected, and in which direction, by the following business activity? Use account names from the expanded accounting equation. Select all that apply. An owner invests $25,00 in the business, cash.
1) decrease investment revenue
2) decrease cash
3) decrease owners capital
4) increase cash
5) increase owners capital
6) increase investment revenue
&) decrease accounts receivable
...
Choose the stakeholder that is MOST likely to ask the following question. How much does the business owe to its current suppliers
1) Canada revenue agency
2) managment ( retailer )
3) supplier ( wholesaler)
4) business owner
5) customer
6) lender ( banker)
...
Choose the stakeholder that is MOST likely to ask the following question. Has the business fairly represented its profit for tax purposes?
1) Canada revenue agency
2) managment ( retailer )
3) supplier ( wholesaler)
4) business owner
5) customer
6) lender ( banker)
...
Choose the stakeholder that is MOST likely to ask the following question. Will this business last as long as its products last?
1) Canada revenue agency
2) managment ( retailer )
3) supplier ( wholesaler)
4) business owner
5) customer
6) lender ( banker)
...
Provide the missing number in the following equation. Profit = 11550, Dividends = 1000, Retained Earnings = ?
...
Provide the missing number in the following equation. Assets = ?
Liabilites = 167350, Equity = 209188
...
Which characteristics or assumption is best represented by the following statement information is provided before it is out - of - state and loses the capacity to change the mind of the stakeholder
10 verifiable
2) understandable
3) historic
4) going concern
5) comparable
6) relevant
7) full disclosure
8) faithful
9) timely
10) separate entity
...
Which characteristics or assumption is best represented by the following statement. Three people lookign at the information would all determine the same amount or similar
10 verifiable
2) understandable
3) historic
4) going concern
5) comparable
6) relevant
7) full disclosure
8) faithful
9) timely
10) separate entity
...
Which characteristics or assumption is best represented by the following statement. All financial information is given in the same currency.
1) verifiable
2) understandable
3) historic
4) going concern
5) comparable
6) relevant
7) full disclosure
8) faithful
9) timely
10) separate entity
...
Which accounts are affected, and in which direction, by the following business activity? Use account names from the expanded accounting equation. Select all that apply. Paid cash of $350 to repair the office photocopier
10 no entry required
2) increaes accounts payable
3) increase accounts receivable
4( decrease accounts receivable
5) decrease cash
6) decrease accounts payable
7)Decrease repairs & maintence expence
8) decrease equipment
10) increae website design
110 decrease cash
...
Which accounts are affected, and in which direction, by the following business activity? Use account names from the expanded accounting equation. Select all that apply. receined a bill for website design, $3,490. You will pay next moth
10 no entry required
2) increaes accounts payable
3) increase accounts receivable
4( decrease accounts receivable
5) decrease cash
6) decrease accounts payable
7)Decrease repairs & maintence expence
8) decrease equipment
10) increae website design
110 decrease cash
...
Which accounts are affected, and in which direction, by the following business activity? Use account names from the expanded accounting equation. Select all that apply. Delivered all the flyers you purchased from staples and which yo paid for last month.
10 no entry required
2) increaes accounts payable
3) increase accounts receivable
4( decrease accounts receivable
5) decrease cash
6) decrease accounts payable
7)Decrease repairs & maintence expence
8) decrease equipment
10) increae website design
110 decrease cash
...
Which accounts are affected, and in which direction, by the following business activity? Use account names from the expanded accounting equation. Select all that apply. Provided services for customers for $2,500 cash.
10 no entry required
2) increaes accounts payable
3) increase accounts receivable
4( decrease accounts receivable
5) decrease cash
6) decrease accounts payable
7)Decrease repairs & maintence expence
8) decrease equipment
10) increae website design
110 decrease cash
...
Indicate which financial reporting element the following account belongs in. Rent revenue
1) liabilites
2) equity
3) expenses
4) assets
5) revenues
...
Indicate which financial reporting element the following account belongs in. Accounts receivable
1) liabilities
2) equity
3) expenses
4) assets
5) revenues
...
Indicate which financial reporting elemtnt the following account belongs in. Sales revenue
1) liabilites
2) equity
3) expenses
4) assets
5) revenues
...
Indicate which financial reporting elemtnt the following account belongs in. Wages expense
1) liabilites
2) equity
3) expenses
4) assets
5) revenues
...
Indicate which financial reporting element the following account belongs in. Prepaid insurance
1) liabilities
2) equity
3) expenses
4) assets
5) revenues
...
Indicate which financial reporting element the following account belongs in. Land
1) liabilities
2) equity
3) expenses
4) assets
5) revenues
...
Provide the missing numbers in the following data. Beginning of the period: assets = 393362, Liabilities = ?, Equity =?

change in the period: assets = -102000, liabilities = -52000, equity = -50000

end of period: assets = 292362, liabilities = 127256, equity = 165106
...
What is the profit?
Owners capital = 19800
wages payable = 2500
unearned revenue = 2900
intangibles = 16200
suppliers = 2260
prepaid expense = 3750
service revenue = 36000
dividends = 1300
rent expenses = 13400
wages expenses = 10750
accounts receivable = 5300
loan payable due in 2025 = 7600
supplies expense = 3750
cash = 14020
accounts payable = 6800
...
Why is the financial statement important for stakeholders
The financial stakeholders is important for financial stakeholder because lets saw the bank is an external stakeholder, the need the financial information so they can decide on the amount of the loan and intrest they want to give, and if the business will be able to repaid it.
What does GAAP stand fro? Why is GAAP used?
GAAP = generally accepted accounting principles. Prepared of an accounting information use GAAP as a guildine when prepairing financial accounting information. The overally objective of GAAP is to proveide financial infromation about a buiness that is USEFUL to external stakeholders for decision making
What is the problem with using the basic accouting equation to record all business activities ( like this just shows trans, assets, libabilites, and equity )
There are many problems

1. does not provide the necessary details for you to make decisions about your business. For instance, you dont know if you have enough cash to repay you parents

Basically its not detailed enough

2) You don't know if the company has been profitable. To calculate this you would have to do manual calculations

3) you have no details about any of the elements, such as what makes up you assets?
An advertising buisness would be in which businesss sector?
Teritiary. This is because it is involved in providing services, which mathces the defition of the teritiary sector
Tertiary sector
Services provided to the public or other businesses
What was the gross profit ratio for your business? would you consider this gross profit margin good? why or why not?

Sales - $14,600
Sales returns and allowences - $1,500
Sales discounts - $275
Cost of goods sold - $9,400
Gross profit - $3,425
The gross profit is calculated as

Gross profit / net sales
$3,425 ? $12,825 = 26.7%

It is not possible to determine if it is good or bad. A comparison needs to be made with industry standards ( what is common in the industry ).

Also, gross profit must cover all the operating expenses.

Unless we know all the operating expenses it is not possible to determine if the gross profit is good or bad. we need more info
Industry standards
What is common in the industry
What must gross profit cover?
All operating expenses
Why is the gross profit ratio ( the % ) a better measure than gross profit * the dollar amount ) to determine how well the business did for the month ?
Because gross profit it a $ figure. Only when we compare we can asses properly.

By changing the number into a % we can asses if the $ figure is large or small ( in comparison to net sales ).

We can also use the % to compare to other businesses and not get confused.
How do you sale gross profit into gross profit ration
By using net sales
On July 13 some of the inventory sold to miranda inc. on July 9 was returned because it was the wrong colour. It was shipped FOB shipping point. Who paid for the return shipping cost? If you paid, which account did you charge the shipping cost and why? Why do you think the shipping terms were FOB shipping instead of FOB destination
We would pay the shipping cost on the original puchas ebecause it was being set to use from Mirand ainc. it was sent FOB shipping point and we are not the shipping point!

We paid for the return shipping cost becasue it was shipped FOB shipping point from Mirnada ince. We are the destionation not the shipping point, so we have to pay.

When we purchase inventory FOV shipping point we add the cost of the freight into the inventory account. This follows the
Historical cost assumption
Record all assets at the total cost to get them on our shelf
As a purchases, what shipping terms would you perfer: FOB shipping point of FOB destination> Why, as a purchase do you perfer those shipping terms
Fob destination because it means that the seller has to pay the freight costs and we dont have to pay for shipping. We are the destination when we make a purcahse - we want the FOB point to be us, so we dont pay. The cost of shipping is added to the inventory account and makes our inventory more expense. If we cannot increase our process then those shipping costs will increase our cost of goods sold 9 have we sseel the inventory ) and reduce our gross profit and gross profit ration
As a seller, what shipping temrs would you perfer: FOB shipping or FOB destination? Why, as a seller, do you perfer those shipping temrs?
FOB shipping point because it means that the buyer has to pay the freight costs and we, the seller, dont have to pay for shipping, which is an expnse and reduced our profit! We are the shipping point when we make a sale - we want the FOB poin to be us, so we dont pay.
What element is gas costs ( used )
Expense
What element is "money you put in to start the business"
equity
What element is Equipment rental cost
Expsense
What element is scooter purchaed ( personal )
Not included due to serprate entity assumptions
What element is cash in bank ( personal )
not included due to seperate entity options
Money borrowed from parent to start business
liability
What element is cash in bank ( business )
Asset
What element is Advertising costs
expsense
What element is cell phone costs ( business )
expense
What element is customer payments
revnue
What element is container full of gas
asset
Why is an accounting system importnat to external stakeholders
it is important becasue companies record thier business transsaction in an accouitng system, and information system that collects, groups and communicated a buissnesss financail postition, including its financial health and profitability. Without it staeholder wouldnt have the information to make their objectives.
Do external stakeholders have access to the businesses accounting system
No! Instead they depend on the financial statments that businesses produce
What do financial statements provide
they provide a buinesses financial performace, its current financial position, and its cash flow. Ecternal stakeholders use the financial statements to analyze a business and answer questions, which allows them to make deciosn and meet their objectices
Why is it important to review your financial staments regularly, even if you run your own business
It is importnat because in order to make good business decsisions, all stakeholder need to have a good idea of how the business has progressed in th epast. By reviewing ALL the financial statments and analyzing them the stakeholders can answer the questions they have so as to make better decisions.
can you use this information to predict how you will do over the upcoming 11 months? if you were not profitable do you feel that you should quit your business? why or why not
You were profitable for the month, earning a profit ( not income ) of $1,950. It would be difficult to predict how much you will make over the upcoming 11 months since you have only had one month of business and that is not enough to try and predict the future of your business. Also, the amount of time you can devote to the business may vary, depending on what your courses require: your time.

If you had not been profitable it should not have caused you to close your business after one month. Most businesses are not profitable fro the first 2 - 5 years
what period does an income statement represent
one month
What is earning profit AKA
net income
What are the critical enhancing questions
What did the business get
What did the business give away
What did the business earn ( revenue )
What did teh business use, consumer, or incur ( expnse )
What does the business owe ( liabilites or owners capital )
When do you use the critical enhancing questions so important
you use them if there is still confusion about how the activity affects the financial reporting elements.
Wha =r do businesses record in the sales returns and allowances and sales discount accounts> Why do businesses have separate sales returns and allowances as well as sales discount accounts? Why not record all these entires into the sales account?
when youre the seller and your customer takes a siscount ( pays you less than the amount of their accounts erceivable) you ise a seperate account called sales discounts. This account provides managment with better information for decison making as they can track the amount of the discounts that they provided to their customer and compare it to the total revenue. It will help the, decide, in the future, whether to increase or decrease the discount offered to their customer

Retuns are exactly the same. Instead of using the sales revnue accoun the seller uses the contra-revnue account called sales returns and allowances. You use a seperate account because it provides managment with better information for decsion-making as they know how many returns there are in comparision to the sales revenue. If the number is high managment would want to investigate why there are so many returns
In what way is the expanded accounting equation better than the basic accounting equation?
Provides information about the profitability of the business ( total revenues and expenses)
what does the expanded accounting equation NOT provide to business owners that they need for decison making?
- the details about the business operations
- there are no details about what the major costs on the income statment are.
- there is no detial about what makes up the assets
- you, as the owner, cant even tell if you have enough cash to repay your parents loa at the end of the period
Assets
Owed, benefits the business in the future, due to a past transaction
Liabilities
Owed ( obligation ), will be settled in the future ( through giving up cash, goods, or services ), due to a past transaction
Equity
Wealth due to the owners of the business BY the business, made up of owners capital and retained earning. Owners capital is the direct investment by owners.
Retained earning
Profit - dividends
Revenue
Income eaned by a business by a business by services provided, goods delivered ( not past tense.. must already have happened )
Expense
Cost of goods or services the business has used, consumer, or incurred to help generate revenue. Revenue must LEAD, expense follow behind ( are cause by) generate revenue
What does 2/10, n?30 mean if you are selling inventory? Why would you, as a seller, offer this?
If you are a seller, you are offering your customers a 2% discount if they pay you within 10 days from the date of delivery.

If they don't pay you within 10 days you want the customer to pay you the full amount within 30 days of the date if delivery.

Remember that if you collect the cash from your sales earlier you can use that cash to pay bills.

Also, you may not need to borrow as much from the bank. Remember, if you borrow money from the bank you have to pay the bank the principal amount, plus interest. The interest is an expense on the income statement ( incurred to help generate revenue) and that means that you will have less profit for expansion of the business and paying dividends to the owners
What is the principle amount
the amount you borrowed
What is the difference betveween financial data and financial information?
Businesses are involved in thousands of businesses activities every day. These activities, when recorded, result in financial data. The problem is that financial data is not financial information. What's the difference? Information is the end product of data processing. Once data has been categorized, analyzed, and formatted for presentation purposes it becomes information that can be used for decision making.
Income statement
The business is profitable earning a total of $34,710 of profit for the year. The profit margin is determined by dividing profit by the Service revenue, $34,710? $225,000 = 15%. The largest expense is salaries, which is common for a service business as services depend on human capital
Balance sheet
Liquid assets ( which are cash or closed to cash, such as accounts receivable _ total $106,350. The current liabilities which must be paid off are $24,675. Not: deferred revenue is mot included as it will not be paid off but provided in services! Therefore, there is enough cash to pay off current liabilities immediately if there was a need to do so.

There is nothing of concern in this business. The business has good liquidity. Their cash position is such that it would be able to deal with any unexpected costs because its current assets at $132,900 are well above its current liabilities $27,075

The business is equity-financed because equity makes up 64% of the total liabilities and equity ( $94,245 / 148,320 )
Cash flow statement
The main source of cash is financing activities, with a cash inflow of $24,300. This appears to be a negetive trend. The cashflow from operating activites was $20,220, which was enoguh to finance the purchase of the intagibles for $14,340. There appears to be no need to have a cash inflow from financing activites, from the loan and the additional cash from the owners. In fact, it appears that the cash inflow from the owners was immediately paid out as dividens. it is possible that the business has plans to expand in the future, which is why they have an inflow from financing activites. However, from the statments, it is not clear why the business felt the need for addtional funds from the owners and the bank unless it was to pay dividens, which would not be a good use of funds at this time
Accounts payable
Liability, current, Balance sheet
Accounts receivable
Asset, current, balance sheet
Additional cash received from owners
Financing, Cash flow statment
What question can you answer by using the financial statements that you are not able to provide when you analyze transaction using the expanded accounting equation?
Although the expanded accounting equation allows you to determine your overall profit, it does not provide details about the expenses, so it is difficult for a business to make decisions with regard to their future actions

In addition, the expanded accounting equation does not provide any details about the makeup of assets and liabilities, against hindering a business owners ability to make decisions about the future or review results from the past
Does the current cash position of the business come from the cash you generated from your operations or another source?
Only $1,989.03 of the current cash position come from operating activities

The majority of the cash came from the contributions from the owner and the loan from your parents

This information is available from the statement of cash flows
Define stakeholder. What is the difference between an internal and external stakeholder
Stakeholders are individuals or groups who either affect the business or are affected by the actions of the business. Every stakeholder has an objective, something they want from their relationship with the business. Stakeholders can be either internal or external. Internal stakeholder work FOR the business. Their objectives generally relate to their ability to keep their jobs, do their jobs more efficiently, get promoted, and get paid for their work. External stakeholders are outside of the business and their objectives generally relate to decisions they will make about money.( also called resource allocation decisions ) of about how the business can affect them, other positive or negatively
Which statements are bankers most likely to use and why?
Bankers want to answer question like is there enough cash to pay debts and the intrest on debt. The bank would therefroe want to check out the cash flow statment, particulary the cash flow operations, since that would help them determine if there was enough cash avaible to pay intrest on debt. The bank would also like to check out the balance sheet to see the financial postition of the business, including the amount of debt the business owes to other parties
Separate entity
Only the activities of the business are included in the businesses financial information
Unit of measure
All transactions must be reported using the monetary unit of the country the businesses head office is located in, even if the business has offices in many countries
Going concern
Businesses will continue their operation well into the future
Historic Cost
All purchases will be recorded at the amount that was paid for them
Time period ( periodically )
Information is broken into artificial time periods such as a month, quarter or year so that stakeholders can analyze and compare information to make decisions
Full Disclosure
If something will affect the decisions of the external stakeholders, it must be reported
What are financial reporting assumption and why are they important
Assumptions specify how accountants must record, measure, and report information. By following the qualitative characteristics and these assumptions, prepare of financial information ensure that financial information has the qualities that external shareholder need in order to use the information for decision making.
What Qualities does financial information need in order to make it useful for decision making?
Qualitiative charactersitics: Qualities that stakeholders WANT financial information to have so they can use the information for decision making
Faithful
truthful, meaning it is complete, free of error, and neutral (unbiased)
Relevant
Applicable or pertinent to you decision making, helps you predict the future and/or confirm decisions you made in the past
Comparbale
Can compare the same business from year to year OR between two different businesses int he same industry
Verifiable
Anyone looking at the information would determine similar amounts
Timely
Information is provided quickly ( as old information is less useful )
Understandable
Group and present information so it is clear and concise.
Stakeholder - Shareholder ( of a corporation )
decide to invest or not invest, earn income from their investment
Stakeholder - governments
ensure businesses pay taxes, employ more people, follow laws
Stakeholders - customers
Buy quality products at low prices, get the best warranties on products or services
Stakeholders - suppliers
sell products/ services to the business, get paid on time and in full
Stakeholders - creditors ( banks )
decide whether to lend moeny and how much, ensure business repays loan plus interest on time
Stakeholders - Society/ community
Employ people from the community, improve the standard of living, run their business in an ethical manner, reduce/ eliminate any negetive environmental effects of their business practices, support local charities
Bank loan payable, due 2023
Liability, long term, balance sheet
Business license
Asset, intnagible, balance sheet
Cash
Asset, current
Cash collected from customers
...
Cash paid for dividends
Financing - , cash flow
Cash paid for intangible assets
...
Define the secondary sector and give three examples of businesses that would be included in this sector
The secondary sector takes raw materials and produces finished goods and products from them. Car manufactures, bakeries that sell to retail stores, and clothing manufactures are all examples of business in the secondary sector
Compare and contrast a retailer and a wholesaler
A retailer earns a profit by reselling goods or providing services to consumers ( also called the public 0 in order to satisfy their wants and needs.

A wholesaler buys large quantities of goods from manufactures, warehouses them, and then resells them to retailers. Wholesalers do no sell to consumers
Assets beg - $258,500
Liabilities beg - ?
Equity beg - $136,100
Owners capital - $75000
R/E - ?

Revenues - ?
Expenses - $567,850
Profit - $28,650
Dividends - $7,000
R/E - ?

Asserts end - $309,100
Liabilities end - $152,350
Equity end ?
Owners capital ?
R/E ?
Liabilities beg - $122,400
R/E - $61,100

revenue - $596,500
R/E - $82,750

OC - $157,750
R/ E - $82,750
Profit
Revenues - expenses
What is violated?

A businesses cash balance in its financial stamtens includes two bank accounts at the local bank, one related to the business and the other a personal savings account for the major shareholder
The separate entity assumption is violated,
Which element does interest which is owned on a loan belong to and why?
It belongs in liabilities because it is owed to the bank at some future sate and will be settled in cash. It is also due to a past transaction, which was taking out a loan from the bank
Beg:
assets ?
liabilites ?
equity ?
owners captial - $180,000
R/E - $96,000

During:
assets: $72,000
liabilities: $48,000
profit?
Dividends?

End:
Assets - $550,000
Liabilites - $250,000
Equity - ?
Owners captial - !80,000
R/E ?
Assets - 478,000
Liabilities $202,000
equity - 276,000

Profit - $36,000
Dividends - $12,000

Equity - $300,000

R/E - $120,000
Which element does intrest which is owed on a loan belong yo and why
It belongs in liabilioties because it is owed to the bank at some future date adn will be settles in cash. it is also due to a past transaction, which was taking out a loan form the bank.
How does GAAP help turn financial data into financial information?
Remember that for data to be useful it must first be categorized or grouped. GAAP stipulates the categories, called elements, into which all business activities are divided. theses elements are then used to produce the financial information and then the financial statements which external stakeholders analyze to make decisions
If you are a merchandising business and you purchase inventory with credit terms 3/5, n/20, what would you want to do and why
You would want to pay for you inventory purchase wihtin 5 days. if you pay earlu yout inventory csots less becasey you get a discount. That means you can either make mor eporit when you sell your goods or you can reduce the price of your goofd and be more competitive. A discount on your purhcases mean you reduce the cost of your invenoty by the amount of the discount. For example, if you buy invenotry online for $1,00 and you receive a 2% discount if you pay wihtin 15 days, you will save $20 ($1,00X0.2). The cost of the inventory would be $980. It is tur that $20 may not seem like a lit but if a business pays a large number of invoices within the discout period the total discounts can end up saving the businesss a lot of moneu.
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