Accounting

Assignment: Chapter 3-Processing Accounting Information |

1.

Blueprint Problem: Business Forms and the Accounting Equation

A business is an organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers. A business entity may take the form of a sole proprietorship, partnership,or corporation. Regardless of the business form, the accounting equation shows the relationship among the entity's assets, liabilities, and stockholders' equity.

The Accounting Equation

The details of the activities of a company, or transactions, are recorded in a company's accounting system. These transactions are summarized in a set of reports known as the financial statements. The foundation for the accounting system and the financial statements is the accounting equation.

Assets | = |  Liabilities      +       Stockholders' Equity |

The left side of the accounting equation shows 

the economic resources of the company | = | The right side of the accounting equation

summarizes who provided those assets: 

Creditors or the stockholders'. |

As transactions occur, they affect the accounting equation, but the accounting equation must always stay in balance. A transaction can increase both sides or decrease both sides. A transaction could also affect only one side by increasing one account and decreasing another on the same side of the accounting equation.

APPLYING THE CONCEPTS: Analyzing Changes to Assets, Liabilities and Stockholders' Equity

Thomas Company: The table below demonstrates the effect of the first three transactions for Thomas Company. Review the details of each transaction and determine the effect on the accounting equation. Then, enter the updated amounts for the assets, liabilities, and equity accounts (do not record the transaction). If an updated balance is zero, enter "0".

Transaction | Assets | = | Liabilities | + | Stockholders' Equity |

Beginning | $0 | = | $0...