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ACCT 212 Midterm Week 4
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ACCT 212 Midterm Week 4Question 1
pts
(TCO 1) The Accounting Equation is used to develop the organization's financial reports. (1)
Describe what liabilities value would be if Assets are $50,000 and Owners' Equity is $25,000 by
showing the Accounting Equation (10 points) and (2) provide an example of two liability
accounts. (10 points)
Your Answer:
1. The accounting equation is Assets=Liabilities + Owners'Equity
$50, 000=L+$25,000
In order to find the liability value you will subtract the owners equity value from the Assets
value.
Liabilities=$50,000-$25,000
Liabilities=$25,000
2. Examples of liability accounts are Accounts payable such as when a company purchases
inventory or supplies on credit
Accrued Expenses such as utility payments are another example.
Textbook pages 11-12. Liabilities = $50,000 - $25,000 = $25,000. Notes Payable and Bonds
are examples.
Question 2
pts
(TCO 1) The financial statements present a company to the public in financial terms. (1) Which
financial statement should be prepared first and why (10 points), and (2) explain what
information this financial statement provides. (10 points)
Your Answer:
1. The income statement of operations is the first to be prepared as itcompares the revenues and
expenses for the specified period. The income statement reports revenues and gains as well
as expenses and losses. We find the net income by subtracting the expenses from revenue. Net
income is the most important item in a financial statement.
, Textbook pages 15-21. Income Statement. Compares revenue to expenses.
Question 3
pts
(TCO 1) The accounting profession follows a set of guidelines for measurement and disclosure
of financial information called the Generally Accepted Accounting Principles (GAAP). (1)
Explain what the International Financial Reporting Standards (IFRS) are (10 points) and (2)
provide an example of its application. (10 points)
Your Answer:
The International Financial Reporting Standards are accounting guidelines formulated by the
International Accounting Standards Board. These Standards have been adopted by most
countries across the world. The goal is to maintain stability and transparency throughout the
financial world.
IFRS allows a company to report revenue sooner, so consequently, a balance sheet under this
system might show a higher stream of revenue than GAAP's. IFRS also has different
requirements for expenses; for example, if a company is spending money on development or an
investment for the future, it doesn't necessarily have to be reported as an expense
https://www.investopedia.com/terms/i/ifrs.asp
Textbook pages 6-9. Standards that will make the global economy report using the same
standards. The intention is to make raising capital easier for third-world businesses.
Question 4
pts
(TCO 2) Transaction analysis results in the development of a journal entry. In the start-up of a
business, the owner contributes $750,000 of cash. (1) Name the accounts impacted and how to
use the format account name/debit or credit/dollar amount (10 points), and (2) explain how the
Accounting Equation is impacted. (10 points)
Your Answer:
We would see a debit to cash for $750, 000 and a credit to owners equity of $750, 000. You
would see an increase in assets and owners equity. This would maintain a balance in the
accounting equation.
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