BUAD103- Principles of
Financial Accounting I
Winter 2025
Tutorial “2”
Chapter “1”: Accounting in Business
Exercise “1”: Classify the following accounts into Assets, Liabilities, Owners capital, Owner
withdrawals, Revenues, Expenses
Account name Account type
Bank loan
Accounts payable
Machines
Furniture
Owner Investment
Accounts Receivable
Sale Revenue
Electricity expense
Cash
Withdrawals
Exercise 2: Hal Burton began a Web Consulting practice and completed these transactions during September of the
current year:
Show the effects of the above transactions on the accounting equation of Halley Burton, Consultant. Use the following format
for your answers. The first item is shown as an example.
Increase = I Decrease = D No effect = N
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BUAD103- Principles of
Financial Accounting I
Winter 2025
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BUAD103- Principles of
Financial Accounting I
Winter 2025
Exercise “3”: Select one correct answer:
1. Revenue is properly recognized:
A. When the customer's order is received.
B. Only if the transaction creates an account receivable.
C. At the end of the accounting period.
D. Upon completion of the sale or when services have been performed and the business obtains the right
to collect the sales price.
E. When cash from a sale is received.
2. Net Income:
A. Decreases equity.
B. Represents the amount of assets owners put into a business.
C. Equals assets minus liabilities.
D. Is the excess of revenues over expenses.
E. Represents owners' claims against assets.
3. Increases in equity from a company's earnings activities are:
A. Assets.
B. Revenues.
C. Liabilities.
D. Owner's Equity.
E. Expenses.
4. The difference between a company's assets and its liabilities, or net assets is:
A. Net income.
B. Expense.
C. Equity.
D. Revenue.
E. Net loss.
5. Decreases in equity that represent costs of assets or services used to earn revenues are called:
A. Liabilities.
B. Equity.
C. Withdrawals.
D. Expenses.
E. Owner's Investment.
6. Expenses are:
A. The same as net income.
B. The excess of expenses over assets.
C. Resources owned or controlled by a company.
D. The increase in equity from a company's earning activities.
E. The costs of assets or services used.
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BUAD103- Principles of
Financial Accounting I
Winter 2025
7. Another name for equity is:
A. Net income.
B. Expenses.
C. Net assets.
D. Revenue.
E. Net loss.
8. The excess of expenses over revenues for a period is:
A. Net assets.
B. Equity.
C. Net loss.
D. Net income.
E. A liability.
9. An additional contribution by the owner to the business is called a(n):
A. Liability.
B. Withdrawal.
C. Expense.
D. Contribution.
E. Investment.
10. Distributions of assets by a business to its owners are called:
A. Withdrawals.
B. Expenses.
C. Assets.
D. Retained earnings.
E. Net Income.
11. Assets created by selling goods and services on credit are:
A. Accounts payable.
B. Accounts receivable.
C. Liabilities.
D. Expenses.
E. Equity.
12. An exchange of value between two entities is called:
A. The accounting equation.
B. Recordkeeping or bookkeeping.
C. An external transaction.
D. An asset.
E. Net Income.
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BUAD103- Principles of
Financial Accounting I
Winter 2025
13. Photometer Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction
on the accounting equation?
A. Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.
B. Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.
C. Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect.
D. Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase.
E. Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease.
14. How would the accounting equation of Boston Company be affected by the billing of a client for $10,000
of consulting work completed?
A. +$10,000 accounts receivable, -$10,000 accounts payable.
B. +$10,000 accounts receivable, +$10,000 accounts payable.
C. +$10,000 accounts receivable, +$10,000 cash.
D. +$10,000 accounts receivable, +$10,000 revenue.
E. +$10,000 accounts receivable, -$10,000 revenue.
15. Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on
credit for $75,000. What would be the effects of this transaction on the accounting equation?
A. Assets increase by $75,000 and expenses increase by $75,000.
B. Assets increase by $75,000 and expenses decrease by $75,000.
C. Liabilities increase by $75,000 and expenses decrease by $75,000.
D. Assets decrease by $75,000 and expenses decrease by $75,000.
E. Assets increase by $75,000 and liabilities increase by $75,000.
Exercise 4
a.
The accounts of Garfield Company with the increases or decreases that occurred during the past year are as follows:
Except for net income, an investment of $3,000 by the owner, and a withdrawal of $11,000 by the owner, no other items
affected the owner's capital account. Using the balance sheet equation, compute net income for the past year
Assets= liab+ equity
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BUAD103- Principles of
Financial Accounting I
Winter 2025
25000-5000=(16000-11000)+ (3000-11000+net income)
20000=5000+(-8000+nnet income)
Net income=23,000
b. If the liabilities of a company increased $92,000 during a period of time and equity in the business decreased $30,000
during the same period, did the assets of the company increase or decrease? By what amount?