Homework #1 :Introduction to Financial Accounting (Business Foundations Specialization) Answers 2026

✅ Question 1

Who is responsible for preparing a company’s financial statements?

❌ The company’s tax department
❌ The Financial Accounting Standards Board
❌ The company’s external auditor
❌ The audit committee of the Board of Directors
✅ Company management

Explanation:
Financial statements company management prepare karti hai. Auditor sirf verify karta hai, banata nahi.

✅ Question 2

Which of the following items reduces Net Income? (check all that apply)

✅ Expenses
❌ Revenues
❌ Stockholders’ Equity
❌ Dividends
❌ Liabilities

Explanation:
Net Income = Revenues − Expenses
Isliye sirf expenses Net Income ko kam karte hain.

✅ Question 3

What are Ending Retained Earnings?

Given:
Beginning RE = 30
Revenues = 190
Expenses = 140 → Net Income = 50
Dividends = 10

Ending RE = 30 + 50 − 10 = 70

❌ 20
❌ -20
❌ Not enough information
✅ 70
❌ 50

✅ Question 4

Which transactions violate the balance sheet equation? (check all that apply)

❌ Increase retained earnings and increase a liability
❌ Increase a liability and increase a revenue
❌ Reduce cash and reduce an expense

✅ Increase an expense and reduce a liability
✅ Increase cash and reduce contributed capital

Explanation:
Assets = Liabilities + Equity
Upar ke dono cases me equation balance nahi hota.

✅ Question 5

Which of the following are assets? (check all that apply)

❌ Common Stock
❌ Accounts Payable
✅ Accounts Receivable
✅ Cash
❌ Retained Earnings

✅ Question 6

Which accounts increase with a Debit? (check all that apply)

❌ Accounts Payable
✅ Cash
✅ Land
✅ Advertising Expense
✅ Prepaid Insurance

Rule:
Assets & Expenses ↑ with Debit

✅ Question 7

Paying cash to buy an asset (check all that apply)

❌ Dr. Cash / Cr. Inventory
❌ Dr. Cash / Cr. Common Stock

✅ Dr. Truck 5000 / Cr. Cash 5000
✅ Dr. Prepaid Insurance 500 / Cr. Cash 500

❌ Dr. Advances from Customers / Cr. Cash

✅ Question 8

Bought $300,000 building, $50,000 cash + mortgage

✅ Dr. Building 300,000
  Cr. Mortgage 250,000
  Cr. Cash 50,000

Baaki sab ❌

✅ Question 9

Bought $10,000 inventory on account

❌ Dr. Accounts Receivable / Cr. Inventory
❌ Dr. Accounts Payable / Cr. Inventory
❌ Dr. Inventory / Cr. Cash
❌ Dr. Inventory / Cr. Accounts Receivable

✅ Dr. Inventory 10,000
  Cr. Accounts Payable 10,000

✅ Question 10

Declared $9,000 dividend (cash next month)

❌ Dr. Dividends Payable / Cr. Dividends Expense
❌ Dr. Dividend Expense / Cr. Cash
❌ Dr. Retained Earnings / Cr. Cash
❌ Dr. Dividend Expense / Cr. Dividends Payable

✅ Dr. Retained Earnings 9,000
  Cr. Dividends Payable 9,000

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