Answer the following questions:
1. What is accounting?
2. What is the main difference between financial accounting and managerial accounting?
3. What are GAAP?
4. Why are ethics very important to the accounting profession?
5. What is the fundamental accounting equation, and how does the form of entity impact the basic equation?
Prepare the income statement and balance sheet for the year ending December 31, 20X5 for Company X. The following information is all that is available. Be sure to prepare proper headings and dates on each financial statement.
Owners Equity $120,000
Land 125,000
Revenue from sales to costumers 750,000
Cash 25,000
Salary expense 235,000
Other revenue 15,000
Rent expense 115,000
Accounts payable 50,000
Equipment 250,000
Buildings 400,000
Other operating expenses 300,000
Accounts receivable 50,000
Loans payable 125,000
Retained earnings (equity account) 565,000
Other assets 10,000
Record the following transactions using the accounting equation and T accounts.
1. Owner contributed $50,000 in cash for company stock.
2. Purchased building for $120,000, making a $20,000 down payment and signing a promissory note for the balance.
3. Sold products to customers for $15,000 cash.
4. Paid utilities expense of $2,000.
5. Reduced note payable with an $8,000 cash payment (ignore interest costs).
6. Incurred expense of $3,000, to be paid in the future (accounts payable).
7. Collected $4,000 on an outstanding account receivable.
