Questions And Answers On Accounting And The Financial Accounting Problem

Register to read the introduction… One of the advantages Maria Gonzalez would enjoy is that ownership of a corporation is represented by transferable shares. This would allow Maria to raise money easily by selling a part of her ownership in the company. Another advantage is that because holders of the shares (shareholders’) enjoy limited liability, they are not personally liable for the debts of the corporate entity. Also, because ownership can be transferred without dissolving the corporation, the corporation enjoys an unlimited life. The basic accounting equation is Assets = Liabilities + Equity. (a) Assets are resources owned by a business. Liabilities are claims against assets. Put more simply, liabilities are existing debts and obligations. Equity is the ownership claim on total assets. (b) Equity is affected by shareholders’ investments, dividends, revenues, and expenses. The liabilities are: (b) Accounts payable and (g) Salaries payable. Yes, a business can enter into a transaction in which only the left side of the accounting equation is affected. An example would be a transaction where an increase in one asset is offset by a decrease in another asset. An increase in the Equipment account which is offset by a decrease in the Cash account is a specific example. Business transactions are the economic events of the enterprise recorded by accountants because they affect the basic equation. (a) No, the death of the president of the company is not a business transaction as it does not affect the basic equation. (b) Yes, supplies purchased on account is a business transaction as it affects the basic equation. (c) No, an employee being fired is not a business transaction as it does not affect the basic equation. (a) Decrease assets and decrease equity. (b) Increase assets and decrease assets. (c) Increase assets and increase equity. (d) Decrease assets and decrease liabilities. (a) Income statement. (b) Statement of financial position. (c) Income statement. (d) …show more content…
Cash payments for expenses............................... Net cash provided by operating activities Cash flows from investing activities Purchase of equipment .......................................... Cash flows from financing activities .......................... Sale of shares ............................................................ Payment of cash dividends................................... Net increase in cash ......................................................... Cash at the beginning of the period............................ Cash at the end of the period ........................................ Rp600,000 (410,000) 190,000 (100,000) Rp350,000