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219. Graham Roofing Company, owned by R. Graham, began operations in May and
completed the following transactions during that first month of operations. Show the effects
of the transactions on the accounts of the accounting equation by recording increases and
decreases in the appropriate columns in the table below. Do not determine new account
balances after each transaction. Determine the final total for each account and verify that the
equation is in balance.
May
1
R. Graham invested $90,000 cash in the company.
2
The company purchased $25,000 in office equipment. It paid $10,000 in
cash and signed a note payable promising to pay the $15,000 over the next
three years.
2
The company rented office space and paid $3,000 for the May rent.
6
The company installed a new roof for a customer and immediately collected
$5,000.
7
The company paid a supplier $2,000 for roofing materials used on the May
6 job.
8
The company purchased a $2,500 copy machine for office use on credit.
9
The company completed work for additional customers on credit in the
amount of $16,000.
15
The company paid its employees salaries $2,300 for the first half of the
month.
17
The company installed a new roof for a customer and immediately collected
$2,400.
20
The company received $10,000 in payments from the customers billed on
May 9.
28
The company paid $1,500 on the copy machine purchased on May 8. It will
pay the remaining balance in June.
31
The company paid its employees salaries $2,400 for the second half of the
month.
31
The company paid a supplier $5,300 for roofing materials used on the
remaining jobs completed during May.
31
The company paid $450 for this month’s utility bill.
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GRAHAM ROOFING CO.
Assets =
Liabilities +
Equity
Date
Accounts
Accounts
Notes
R. Graham
R. Graham
May
Cash
Receivable
Equipment
Payable
Payable
Capital
Withdrawals
Revenues
Expenses
1
2
2
6
7
8
9
15
17
20
28
31
31
31
$
–
$ –
$ –
$ –
$
–
$ –
$ –
$ –
$ –
Fill in the Blank Questions
220. Accounting is a(n) ______________________ that identifies, records and communicates
relevant, reliable and comparable information about an organization’s economic activities.
221. A ____________________ is a business that is owned by only one person.
222. ______________ users of accounting information are not directly involved in running
the organization.
223. ______________ is the area of accounting aimed at serving external users.
224. Congress passed the ______________________ to help curb financial abuses at
companies that issue their stock to the public.
225. _________ are beliefs that separate right from wrong.
226. The assumption that requires that a business be accounted for separately from its owners
is the __________________ assumption.
227. The _______________ assumption requires that financial information is supported by
independent, unbiased evidence.
228. The ______________ assumption assumes business will continue operating indefinitely
instead of being closed or sold.
229. The ________________ assumption states that transactions and events are expressed in
money units.
230. In accounting, the rule that requires that assets, services, and liabilities be recorded
initially at the cash or cash-equivalent value of what was given up or of the item received is
called the ______________________________.
231. A disadvantage of a sole proprietorship is the fact that the owner has ______________.
232. There are at least three types of partnerships that limit the partners’ liability. They are
1)_____________________, 2) ___________________, and 3)______________________.
233. ________________ activities are the means organizations use to pay for resources such
as land, building, and equipment.
234. ________________ activities involve the acquisition and disposal of resources that an
organization uses to acquire and sell its products or services.
235. ______________ activities involve using resources to research, develop, purchase,
produce, distribute, and market products and services.
236. Assets removed from the business by the business owner for personal use are called
____________.
237. ____________ are the increases in equity from a company’s earnings activities.
238. A common characteristic of __________ is their ability to provide expected future
benefits to a business.
239. Creditors claims on assets that reflect obligations to transfer assets are called ________.
240. The owner’s claim on assets is called __________________.
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241. The accounting equation is ______________________________.
242. The term ___________ refers to a liability that promises a future outflow of resources.
243. Using the accounting equation, equity is equal to ________________________.
244. ______________________ is the recording of financial transactions and events, either
manually or electronically.
245. _________________ is net income divided by average total assets.
246. Risk is the _________________ about the return an investor expects to earn.
247. ________________________________ reports changes in the owner’s claim on the
business’s assets over a period of time.
248. The ____________________ describes a company’s revenues and expenses over a
period of time due to earnings activities.