1. Which of the following is not part of the accounting process?

a) Recording
b) Identifying
c) Financial decision making
d) Communicating
2. The first part of the accounting process is
a) communicating
b) identifying
c) processing
d) recording
3. Internal users of accounting information include all of the following except
a) company officers
b) investors
c) marketing managers
d) production supervisors
4. A proprietorship is a business
a) owned by one person
b) owned by two or more persons
c) organized as a separate legal entity under state corporation law
d) owned by a governmental agency.
5. A net loss will result during a time period when
a) assets exceed liabilities
b) assets exceed owner's equity
c) expenses exceed revenues
d) revenues exceed expenses
6. Ryder Company purchases 600 of equipment from Montez Inc for cash. The effect on the
components of the basic accounting equation of Ryder Company is
a) an increase in assets and liabilities
b) a decrease in assets and liabilities
c) no change in total assets
d) an increase in assets and a decrease in liabilities
7. Fontaine Fox Company buys a 12 000 van on credit The transaction will affect the
a) income statement only
b) balance sheet only
c) income statement and owner's equity statement only
d) income statement, owner's equity statement, and balance sheet
BE 1
Match the following terms and definitions.
a. Accounts receivable c. Accounts payable
b. Creditor d. Note payable
_______ (1) Amounts due from customers
_______ (2) Amounts owed to suppliers for goods and services purchased
_______ (3) Amounts owed to bank
_______ (4) Party to whom money is owed

BE 2:
Indicate which of these items is an asset (A), liability (L) or owner’s equity (OE) account.
_______ (1) Supplies
_______ (2) Klein, Drawing
_______ (3) Building
_______ (4) Note Payable
_______ (5) Taxes Payable

BE 3:
Identify the impact on the accounting equation of each of the following transactions.
1. Purchase office supplies on account.
2. Paid secretary weekly salary.
3. Purchased office furniture for cash.
4. Received monthly utility bill to be paid at later time.
Solution 3
1. Increase assets and increase liabilities.
2.
3.
4.

BE 4:
Identify whether the following items would be reported on the income statement (IS) or
balance sheet (BS).
1. Cash
2. Service Revenue
3. Notes Payable
4. Interest Expense
5. Accounts Receivable
BE 5:
Use the following information to calculate for the year ended December 31, 2009 (a) net
income (net loss), (b) ending owner’s equity, and (c) total assets.
Supplies $1,000 Revenues $23,000
Operating expenses 12,000 Cash 15,000
Accounts payable 9,000 Drawings 1,000
Accounts receivable 3,000 Notes payable 1,000
Beginning Capital 5,000 Equipment 6,000

Net income/ loss:

Ending owner’s equity:

Total assets:

BE6:
For the items listed below, fill in the appropriate code letter to indicate whether the item is an
asset, liability, or owner's equity item.
Code
Asset A
Liability L
Owner's Equity OE
1. Rent Expense_______ 6. Cash________
2. Office Equipment ______ 7. Accounts Receivable _______
3. Accounts Payable ______ 8. Dan Pine, Drawing ________
4. Dan Pine, Capital ______ 9. Service Revenue _________
5. Insurance Expense _____ 10. Notes Payable _________

BE 7:
Selected transactions for Tall Timber Tree Service are listed below.
1. Made cash investment to start business.
2. Paid for monthly advertising.
3. Purchased supplies on account.
4. Billed customers for services performed.
5. Withdrew cash for owner’s personal use.
6. Received cash from customers billed in (4).
7. Incurred utilities expense on account.
8. Purchased additional supplies for cash.
9. Received cash from customers when service was performed.
Instructions
List the numbers of the above transactions and describe the effect of each transaction on
assets, liabilities, and owner’s equity.
For example, the first answer is: (1) Increase in assets and increase in owner’s equity.

BE 8:
Analyse the transactions of a business organized as a proprietorship described below and
indicate their effect on the basic accounting equation. Use a plus sign (+) to indicate an
increase and a minus sign (–) to indicate a decrease.
Assets= Liabilities + Owner's Equity
1. Received cash for services rendered.
2. Purchased office equipment on credit.
3. Paid employees' salaries.
4. Received cash from customer in payment on account.
5. Paid telephone bill for the month.
6. Paid for office equipment purchased in transaction 2.
7. Purchased office supplies on credit.
8. Owner withdrew cash for personal expenses.
9. Obtained a loan from the bank.
10.Billed customers for services rendered.

BE 9:
The following information relates to Ty Ringo Co. for the year 2010.
Ty Ringo, Capital, January 1, 2010 $47,000 Advertising expense $1,500
Ty Ringo, Drawing during 2010 6,000 Rent expense 9,500
Service revenue 62,500 Utilities expense 3,400
Salaries expense 29,000
Instructions
Prepare an income statement and an owner’s equity statement for the year ending December
31, 2010.
BE 10: Hamouda is the bookkeeper for Ayala Company. Hamouda has been trying to get the
balance sheet of Ayala Company to balance. Ayala’s balance sheet is as follows.
AYALA COMPANY
Financial Sheet
For December 31, 2010
Assets Liabilities
Cash $17,400 Accounts payable $30,000
Supplies 7,100 Accounts receivable 9,500
Equipment 45,000 Ayala, Capital 58,200
Ayala, Drawing 9,200 Total liabilities and Total assets $78,700
owner’s equity $78,700
Instructions
Prepare a correct balance sheet.

BE 11:
Presented below is information related to the sole proprietorship of Anthony Scalici,
consultant.
Consulting service revenue—2010 $340,000
Total expenses—2010 213,000
Assets, January 1, 2010 85,000
Liabilities, January 1, 2010 64,000
Assets, December 31, 2010 165,000
Liabilities, December 31, 2010 80,000
Drawings—2010?
Instructions: Prepare the 2010 owner’s equity statement for Anthony Scalici’s consulting
company.
Ex.12:
Prepare an income statement, an owner's equity statement, and a balance sheet for the
acupuncture practice of BiLoi, from the items listed below for the month of September.
Bi Loi, Capital, September 1 $42,000
Accounts payable 7,000
Equipment 30,000
Service revenue 25,000
Bi Loi, Drawings 6,000
Dental supplies expense 3,500
Cash 6,000
Utilities expense 700
Dental supplies 2,800
Salaries expense 9,000
Accounts receivable 14,000
Rent expense 2,000