Examples

If a business has liabilities of $100,000 and owner's equity of $55,000, assets total $155,000.
If total assets decreased by $40,000 during a specific period and owner's equity decreased by
$45,000 during the same period, the period's change in total liabilities was a $85,000 increase.
F
Selected transactions completed by a proprietorship are described below. Indicate the

effects of each transaction on assets, liabilities, and owner's equity by inserting "+" for
increase and "-" for decrease in the appropriate columns at the right. If appropriate,
you may insert more than one symbol in a column.
A L OE
(a) Received cash from owner as an additional _____ _____ _____
investment
(b) Purchased supplies on account _____ _____ _____
(c) Paid rent for the current month _____ _____ _____
(d) Received cash for services sold to _____ _____ _____
customers
(e) Returned defective supplies purchased in _____ _____ _____
(b)
(f) Paid insurance premiums in advance _____ _____ _____
(g) Paid cash to creditor for purchases in (b) _____ _____ _____
(h) Charged customers for services sold on _____ _____ _____
account
(i) Paid cash to a customer as a refund for an _____ _____ _____
overcharge
(j) Received cash on account from customers _____ _____ _____
(k) Paid cash to owner _____ _____ _____
(l) Recorded the cost of supplies used during _____ _____ _____
the year
(m) Received invoice for power used _____ _____ _____
(n) Paid expenses _____ _____ _____
(o) Purchased a truck for cash _____ _____ _____
ANSWERS
A L OE
(a) + +
(b) + +
(c) - -
(d) + +
(e) - -
(f) +,-
(g) - -
(h) + +
(i) - -
(j) +,-
(k) - -
(l) - -
(m) + -
(n) - -
(o) +,-
Identify each of the following as (1) asset, (2) liability, or (3) owner's equity:
(a) Accounts Payable

(b) Accounts Receivable
(c) Dj, Capital
(d) Prepaid Rent
(e) Cash
(f) Land
ANSWERS
(a) liability
(b) asset
(c) owner's equity
(d) asset
(e) asset
(f) asset
Determine the missing amount for each of the following:
Assets Liabilities Owner's Equity

(a) ? $15,000 $ 6,000
(b) $30,000 ? $14,000
(c) $50,000 $ 5,000 ?
ANS:
(a) $21,000
(b) $16,000
(c) $45,000
Increases and decreases in various types of accounts are listed below. In each case,
indicate by "Dr." or "Cr." (a) whether the change in the account would be recorded as a
debit or a credit and (b) whether the normal balance of the account is a debit or a credit.
(a) (b)
Recorded Normal
As Balance
(1) Increase in D. Fleming, Capital ________ _______
(2) Increase in D. Fleming, Drawing ________ _______
(3) Decrease in Accounts Receivable ________ _______
(4) Increase in Note Payable ________ _______
(5) Increase in Accounts Payable ________ _______
(6) Decrease in Supplies ________ _______
(7) Decrease in Salaries Expense ________ _______
(8) Increase in Accounts Receivable ________ _______
(9) Increase in Cash ________ _______
(10) Decrease in Land ________ _______
ANSWERS
(a) (b)
(1) Cr. Cr.
(2) Dr. Dr.
(3) Cr. Dr.
(4) Cr. Cr.
(5) Cr. Cr.
(6) Cr. Dr.
(7) Cr. Dr.
(8) Dr. Dr.
(9) Dr. Dr.
(10) Cr. Dr.
Record the following selected transactions for March in a two-column journal, identifying
each entry by letter:
(a) Received $10,000 from Ikaw, owner.

(b) Purchased equipment for $35,000, paying $10,000 in cash and giving
a note payable for the remainder.
(c) Paid $1,000 for rent for March.
(d) Purchased $8,500 of supplies on account.
(e) Recorded $2,500 of fees earned on account.
(f) Received $11,000 in cash for fees earned.
(g) Paid $200 to creditors on account.
(h) Paid wages of $1,250.
(i) Received $1,150 from customers on account.
(j) Recorded owner's withdrawal of $1,850.
ANSWERS
(a) Cash 10,000

Ikaw, Capital 10,000
(b) Equipment 35,000

Cash 10,000
Note Payable 25,000
(c) Rent Expense 1,000

Cash 1,000
(d) Supplies 8,500

Accounts Payable 8,500
(e) Accounts Receivable 2,500

Fees Earned 2,500
(f) Cash 11,000
Fees Earned 11,000
(g) Accounts Payable 200

Cash 200
(h) Wages Expense 1,250

Cash 1,250
(i) Cash 1,150

Accounts Receivable 1,150
(j) Ikaw, Drawing 1,850

Cash 1,850
Account Account Side

(1) Supplies _______ ________
(2) Notes Receivable _______ ________
(3) Fees Earned _______ ________
(4 Ako, Drawing _______ ________
(5) Accounts Payable _______ ________
(6) Salaries Expense _______ ________
(7) Ako, Capital _______ ________
(8) Accounts Receivable _______ ________
(9) Equipment _______ ________
(10) Notes Payable _______ ________
ANS:
Type of Increase
Account Account Side
(1) A Dr.
(2) A Dr.
(3) R Cr.
(4) N Dr.
(5) L Cr.
(6) E Dr.
(7) N Cr.
(8) A Dr.
(9) A Dr.
(10) L Cr.

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If a business has liabilities of $100,000 and owner's equity of $55,000, assets total $155,000.

Selected transactions completed by a proprietorship are described below. Indicate the

(a) Accounts Payable

Determine the missing amount for each of the following:

Assets Liabilities Owner's Equity

(a) Received $10,000 from Ikaw, owner.

(a) Cash 10,000

(b) Equipment 35,000

(c) Rent Expense 1,000

(d) Supplies 8,500

(e) Accounts Receivable 2,500

(g) Accounts Payable 200

(h) Wages Expense 1,250

(i) Cash 1,150

(j) Ikaw, Drawing 1,850

Account Account Side

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