Ex 1-6A Components of the accounting equation
Lang Enterprises was started when it acquired $4000 cash from creditors and $6000 from owners. The company immediately purchased land that cost $9000.
a. Record the events under an accounting equation.
Assets = Liabilities + Capital
| Assets |= | Liabilities |+ | Capital |
|Cash |Land | | Creditors | | |
|10,000 | |= |4,000…show more content… Assume the debt is due. Given that Lang has $6000 in stockholders' equity; can the company repay the creditors at this point? Why or why not?
No, the company cannot pay its debt at this point of time because the company cannot pay their debt out of equity. Company can pay maximum debt of $1,000 because it had only $1,000 in its balance.
Respond to the following:
Why is the knowledge of accounting concepts and terminology useful to anyone in a business activity?
The knowledge of accounting concepts and terminology is useful to anyone in a business activity is due to the following reasons;
1. It is Useful for making investment and credit decisions.
2. The knowledge is helpful to present potential investors, creditors and others in assessing the amounts, timings, and uncertainty of future cash flows,
In other words, this will be helpful for everyone connected with business activity, in any way.
Is there a difference between bookkeeping and accounting? Discuss.
Yes, there is a difference between book keeping and accountancy.
1) Book-keeping is the art of keeping and maintain accounts in the prescribed manner whereas accounting is mainly concerned with the design of the system of records, preparation of reports based on the recorded data , and interpretation of the reports.
2) The work of bookkeeper is clerical in nature whereas in accounting accountants direct and