Accounting: 2-5 Introduction to Balance Sheets

What does a balance sheet report on?

• Revenue and Expenses

• Debt and Equity

• Assets, Liabilities, and Owners’ Equity

• Cash and Inventory

Why is the balance sheet called a balance sheet?

• Because it must balance

• Because it shows financial transactions

• Because it lists all expenses

• Because it tracks revenue

What is the accounting equation?

• Liabilities = Revenue + Expenses

• Liabilities = Owners’ Equity - Assets

• Assets = Revenue - Expenses

• Assets = Liabilities + Owners’ Equity

What is the impact of receiving a cash investment from the owner on the balance sheet?

• Assets increase by $5,500 and Equity increases by $5,500

• Equity decreases by $5,500 and Liabilities increase by $5,500

• Assets decrease by $5,500 and Liabilities increase by $5,500

• Liabilities increase by $5,500 and Equity decreases by $5,500

What happens to the balance sheet when cash is used to pay for an annual insurance policy?

• Equity increases

• Revenue decreases

• Liabilities decrease

• Assets remain the same

What is the effect on the balance sheet when supplies are purchased on account?

• Assets increase and Liabilities decrease

• Assets decrease and Liabilities decrease

• Assets increase and Liabilities increase

• Assets decrease and Liabilities increase

What happens to the balance sheet when cash is used to pay down Accounts Payable?

• Assets increase and Liabilities decrease

• Assets decrease and Liabilities increase

• Assets increase and Liabilities increase

• Assets decrease and Liabilities decrease

What is the impact of borrowing money on the balance sheet?

• Assets decrease and Liabilities increase

• Assets increase and Liabilities decrease

• Assets increase and Liabilities increase

• Assets decrease and Liabilities decrease

What is a prepaid expense considered as on the balance sheet?

• An Asset

• A Liability

• Equity

• Revenue

What is the purpose of the BusinessU Accounting Framework (BUAF®)?

• To manage inventory

• To track cash flow

• To calculate revenue and expenses

• To visually represent the balance sheet and accounting equation