Basic Accounting Equation Flashcard

Front

What is the basic accounting equation?

Back

ASSETS = LIABILITIES + EQUITY

Front

In a sole proprietorship, what is equity referred to as?

Back

Owner's Equity

Front

What happens to the accounting equation when a business purchases equipment for cash?

Back

Assets remain the same, equity remains the same

Front

What is the effect on the accounting equation when supplies are purchased on account?

Back

Assets increase, liabilities increase.

Front

What is the result of making a payment to a creditor?

Back

Assets decrease, liabilities decrease

Front

How is prepaid rent recorded in the accounting equation?

Back

Increase in assets

Front

What happens when services are sold for cash?

Back

Assets increase, equity increases

Front

How is selling services on credit recorded?

Back

Increase in assets

Front

What is the effect of collecting accounts receivable?

Back

Assets remain the same, liabilities remain the same

Front

What is the impact of paying a utility bill on the accounting equation?

Back

Assets decrease, expenses increase