Chapter D, Problem 1DQ

To determine

(a)

Concept introduction:

Assets are the items that the company owns and helps in generating revenue during its lifespan.

To state:

Two Assets.

Answer to Problem 1DQ

Accounts Receivable and Bank Account.

Explanation of Solution

Assets are the items that your company owns which can provide future economic benefits. Assets are defined as resources that help generate profit in your business.

These are shown in the balance sheet of the companies on right side. Assets are either financed by equity or liabilities. Hence, they are also called summation of Liabilities and Assets.

As per Accounting Equation, Assets = Liabilities + Equity:

Some of the examples for assets are:

1. Cash
2. Land and Buildings
3. Equipment
4. Patent
5. Goodwill etc.

To determine

(b)

Concept introduction:

Liability is defined as obligations that your business needs to fulfill. In simple words, Liability means credit.

To state:

Two Liabilities

Answer to Problem 1DQ

Accounts Payable Account & Bank Loan Account

Explanation of Solution

Liabilities are the items the company oweto others. Liabilities are defined as a way to raise finances for the company.

These are shown in the balance sheet of the companies on left side. Liabilities are classified as current and non-current liabilities wherein current liabilities have a maturity period of less than or equal to a year, whereas, non-current liabilities have maturity period of more than a year.

As per Accounting Equation, Liabilities = Assets - Equity:

Some of the examples for liabilities are:

1. Accounts Payable
2. Interest Payable
3. Unearned Revenue
4. Long term debt
5. Bank Loan etc.

To determine

(c)

Concept introduction:

Equity is defined as the items that show the investments of the owner or the investors in the company.

To state:

Two Equity.

Answer to Problem 1DQ

Equity Share Capital Account & Retained earnings Account.

Explanation of Solution

Equity accounts represent the items that displays the amount invested by various people in the company.

Owner’s equity is the difference between what you have and what you owe. It is regarded as the owner's investment or net worth. It denotes the portion of the total assets that the owners or stockholders of the company own

As per Accounting Equation, Equity = Assets - Liabilities:

Some of the examples for equity accounts are:

1. Retained Earnings
2. Additional paid-in Capital
3. Drawings
4. Common Stock Equity
5. Preference Stock