EXAM REVIEW - Accounting
Accounting Equation  A = L + O.E.
Why do businesses bother to record their transactions?

To assess the health of the company

To ensure accountability
Define the following:
1. Asset – things of value that a person or business owns
2. Liability – a debt of a business
3. Owner’s Equity – the owner’s investment in the business or the financial portion of the business
that actually belongs to the owner
4. Revenue – the money a business receives for the products / services it sells
5. Expense –expenditures that help a business generate revenue
6. Current Asset – assets that are held for a short period of time and can be quickly converted into
cash (eg. Cash, A/R)
7. Long-term Liability – A debt that takes longer than a year to pay in full
For the following accounts, label each one as a(n):
A – Asset
L – Liability
OE – Owner’s Equity
R – Revenue
E - Expense
Cash
A
Bank Loan
L
Utilities
E
Sales
R
Rental Revenue
R
Rent
E
Land
A
Accounts Receivable
A
Accounts Payable
L
Capital
OE
Income Tax
E
Supplies
A
Car Loan
L
Building
A
Hydro
E
Note Payable
L
Note Receivable
A
Bank
A
Truck
A
Internet
E
Inventory
A
A/P – Rebecca
L
A/R – Madison
A
Advertising
E
Salaries
E
Credit Union Loan
L
Land
A
The Balance Sheet
What goes on a Balance Sheet?
1. ASSETS (LEFT SIDE)
2. LIABILITIES (RIGHT SIDE)
3. OWNER’S EQUITY (RIGHT SIDE)
Features of a Balance Sheet:

Three Line Heading – Who, What, When

Assets listed in order of liquidity (how fast they can be converted to cash)

Liabilities listed in the order in which they will be paid

Two final totals are listed on the same line and with a double underline beneath them
The Income Statement
What goes on an Income Statement?
1. REVENUE
2. EXPENSES
3. NET INCOME (OR LOSS) = Revenue – Expenses