Which FI Doc Can you find the Basic Accounting Equation? - ANS The Balance Sheet
What is an Asset? - ANS Cash, Equipment, inventory, other sources owned by a business that
will generate wealth
What are the criteria to be considered an asset? - ANS - Be purchased at a measurable cost
- Produce probable economic benefit
- Result from a past event (or transaction)
- Be owned or controlled by the entity
What are Liabilities? - ANS How businesses accursed is assets, borrowing, credit, Loans,
accounts payable, wages payable.
Criteria to be considered a liability - ANS - Must impose probable economic obligation on
economic resources in the future
- The obligation has to be to another entity
- The event that created the obligation must be
Owner's Equity - ANS "The residual interest in the assets of an entity that remains after
deducting the liabilities" SE = A-L
How do payments to owners differ from payments for liabilities to other entities? - ANS - Owners
make decisions in the business
- Payments to owners are not obligated
- Profit Generated belongs to the owner
How will a $500 Investment to Start a business effect the balance sheet? - ANS A(+$500) = L +
SE(+500)
How will a $500 Loan to start a business effect the balance sheet? - ANS A(+500) = L(+500) +
SE
How will receiving $500 in goods on credit effect the Balance Sheet? - ANS A(+500) = L(+500)
+ SE
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