Respond to the following:
1. Why is the knowledge of accounting concepts and terminology useful to anyone in a business activity?
2. Is there a difference between bookkeeping and accounting? Discuss.
3. Accounting reports past performance. How can this be useful when planning future operations?
EXERCISE 1-6A
a. Cash
+
Land
=
Creditors
+ Stockholders’
Equity
$4,000.00 $9,000.00 $13,000.00 $6,000.00 $6,000.00 $9,000.00 $15,000.00 NA
Bal. $10,000.00 $18,000.00 $28,000.00 NA
b.
c.
d.
Indeed, the accounting equation could be written as:
d.
Cash = Note Payable + Common Stock + Retained Earnings
Liabilities + Stockholders’ Equity =
e. Beginning/Ending Cash Balance= $156,000/$169,000
Beginning/Ending Common Stock=$52,400/$52,400
The balances of cash differ because there were transactions that were made, revenue, expenses, and dividends. Common Stock did not change because assets distributed to stock holders are not used for purposes of generating revenue and dividends are not an expenses. The dividends are a transfer of earnings, not a return of the assets acquired from the issue of common stock.