Project Engineering and Professional Practice
EXAM #2 Version B Solutions
November 19, 2008
Page 1 of 8
General Questions (20 points)
What it meant by the term:
"double entry bookkeeping?"
Two entries are made for every monetary transaction.
One entry is referred to as a debit and the other as a credit.
One of the entries points to what the item is and the other entry to who has a claim on it.
Write two different forms for the basic accounting equation.
Assets = Liabilities + Net Worth
$ That you have = $ Owned - $ Owed
What does the abbreviation GAAP stand for?
General and accepted accounting practices
For each of the following questions, circle either DEBIT or CREDIT to represent the best answer according to
entry decreases your cash account.
entry increases an accounts payable.
An increase in inventory is shown on the books as a
Your accountant has just completed your company's books for FY2008, and has provided the following
Cash on hand
Loan balance for equipment
Note payable to bank
Book value of equipment owned
Part of your net worth
Calculate your Net Worth using the above information.
Clearly show how you arrived at your answer.
Net worth = Assets - Liabilities = (72,315 + 12,900 + 118,288) - (27,834 + 137,524 + 29,000)
203,503 - 194,358 = $9,145
Net worth = Treasury stock + non-stock net worth = $9,145
Non-stock net worth = Net worth - Treasury stock = 9,145 - 16,000 = ($6,855)
Either of the above answers is acceptable.