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Why is accounting often referred to as the "language of business"?

Chapter 1

5. Why is accounting often referred to as the "language of business"?

7. What are generally accepted accounting principles (GAAP)? Who currently develops and issues GAAP? What is the purpose of GAAP?

Chapter 3
Practice Exercises

For 3-1 and 3-2 do the following transactions:

a. list the accounts impacted by the transaction
b. for each account indicate whether the transaction increased or decreased the account
c. for each account indicate how much the transaction increased or decreased account amount
d. compute the impact of the transaction on total assets, total liabilities, and total owners' equity.
Impact of a Transaction
3-1
The company borrowed $125,000 in cash from Far West Bank
3-2
The company used $45,000 in cash to purchase land on the Westside of Hatu Lake.

Journal Entries
3-11
Refer to 3-1 make the journal entry necessary to record the transaction
3-12
Refer to 3-2 make the journal entry necessary to record the transaction

Posting
3-16
Refer to journal entries made in 3-11 and 3-12. Construct a T-account representing each account impacted by the two transactions. Post all journal entries to these T-accounts. Compute the ending balance in each account. Assume that the beginning balance in each T-account is zero.

Preparing a Trial Balance
3-19
Refer to the T-account constructed in 3-16. Using the ending balance in those T-accounts, construct a trial balance

Chapter 3 pg 123
The following journal entries are from the books of Kara Elizabeth Company

a. Buildings................................90,000
Cash.........................................35,000
Mortgage Payable..........................55,000
b. Cash........................................25,000
Capital Stock..................................25,000
c. Cash........................................40,000
Loan Payable.................................40,000
d. Salary Expense..............................12,000
Cash.............................................12,000
e. Inventory......................................12,500
Accounts Payable.......................................12,500
f. Accounts Receivable...........................84,000
Sales......................................................84,000
Cost of Goods Sold........................51,000
Inventory..........................................................51,000
g. Cash.......................................................62,000
Accounts Receivable..............................................62,000
h. Accounts payable..........................................38,000
Cash............................................................38,000

For each of the journal entries prepare an explanation of the business event that is being represented.

Chapter 4

7. Why are adjusting entries necessary?

9. The analysis process for preparing adjusting entries involves two basic steps. Identify the two steps and explain why both are necessary.

15. What is the purpose of a closing entries?

16. What is the purpose of the post-closing trial balance? Explain where the information for the post-closing trial balance comes from.

Solution Preview

Please see the attached file for the detailed solution.

Chapter 1

5- Why is accounting often referred to as the "language of business"?

Accounting is the means by which information about an enterprise is communicated and, thus, is sometimes called the language of business. For a business or organization to communicate its results and position to stakeholders, it needs a language that is understood by all in common.

7- What are generally accepted accounting principles (GAAP)? Who currently develops and issues GAAP? What is the purpose of GAAP?

Generally Accepted Accounting Principles (GAAP) is the standard framework of guidelines for financial accounting. It includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements.

Financial Accounting Standards Board (FASB) currently develops and issues GAAP.

The purpose of GAAP is to provide a consistent set of financial measures across companies.

Chapter 3
Practice Exercises

For 3-1 and 3-2 do the following transactions

Impact of a Transaction

3-1 The company borrowed $125,000 in cash from Far West Bank.
a. List the accounts impacted by the transaction.
As the company borrowed cash from Far West Bank, it will impact the accounts
as follows: -
Cash and Notes Payable accounts

b. For each account, indicate whether the transaction increased or decreased the account.
As the money is borrowed, the accounts of cash and notes payable will be
increased.
Cash - Increased
Notes Payable - Increased

c. For each account, indicate how much the transaction increased or decreased the account.
Cash - Increased by $125,000
Notes Payable - Increased by $125,000

d. Compute the impact of the transaction on total assets, total liabilities, and total owners' equity.
Increased total assets by $125,000 (Cash is in total assets)
Increased ...

Solution Summary

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