Practice for Accounting Exercise

Here are practice exercises with answers for you to work on today. These are ungraded and for practice only. Class is optional today. You can work on these practice exercises alone, with a group, or come to class and we will do it together.

Here are some reminders and category explanations to help:

Pay attention to the month (so you know if something is bought on credit or not) and recognize that things (sales and purchases on credit) will have happened the month(s) before

Income Statement

Expenses: Salaries, Bonuses, Office Supplies (not office equipment or furniture), advertising within a time period

Revenue: When a sale is made regardless of how it is paid for (cash versus invoiced, loan, or credit card)

Balance Sheet: Asset totals must = Liabilities totals + Owner’s Equity

Assets: The things that put money into your pocket-listed in order of how easy it is to turn into cash (liquidity)

Cash: Decreases when we pay for things not using credit (AP) or Loans. Increases when we collect on invoices or prior sales made on credit or from cash payment
Accounts Receivable (AR): Increases when we make a sale and they are invoiced or pay with credit. Decreases when we collect payment
Property, Plant, & Equipment (PPE): Stuff we’d sell if we went bankrupt that gets used over time and not just during one month. Things like vehicles, scoreboards, office equipment and furniture

Liabilities: The things that take money out of our pockets over time

Accounts Payable (AP): Increases when we buy things on credit or are invoiced for. Decreases when we pay off transactions that were made with credit
Loans Payable: Increases when take out or add to loans with a bank. Decreases when you pay off part of the loan