How does the purchase of office equipment on account affect the accounting equation?
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A. assets increase; liabilities decrease |
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B. assets increase; owner’s equity increases |
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C. assets increase; liabilities increase |
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D. liabilities increase; owner’s equity decreases |
A purchase of a vehicle for cash would have what effect on the accounting equation?
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A. Total asset amount remains the same. |
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B. Total liabilities are overstated. |
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C. Total owner’s equity is overstated. |
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D. Both A and B are correct. |
The purchase of supplies for cash would affect which account category?
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A. assets |
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B. liabilities |
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C. capital |
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D. expense |
Which of the following transactions would cause one asset to increase and another asset to decrease?
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A. The owner invested cash in the business. |
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B. The business paid a creditor. |
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C. The business incurred an expense on credit. |
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D. The business bought supplies for cash. |
A corporation __________.
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A. can continue indefinitely |
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B. is owned by stockholders |
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C. has limited risk to stockholders |
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D. All of these answers are correct. |
Assets are equal to __________.
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A. liabilities + owner’s equity |
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B. liabilities – owner’s equity |
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C. liabilities – revenues |
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D. revenues – expenses |
Mary invested cash in her new business. What effect will this have?
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A. increase an asset and increase a liability |
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B. decrease an asset and increase a liability |
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C. increase an asset and increase owner’s equity |
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D. increase an asset and decrease owner’s equity |
The Sarbanes-Oxley Act was passed to __________.
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A. prevent fraud at public companies |
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B. replace all of the old accounting procedures with new ones |
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C. improve the accuracy of the company’s financial reporting |
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D. Both A and C are correct. |
Which of the following will be recorded in the owner’s equity column as an increase?
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A. an exchange of assets |
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B. the purchase of an asset on credit |
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C. an investment by the owner |
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D. a withdrawal by the owner |
Which of the following is not a type of business organization?
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A. corporation |
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B. partnership |
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C. sole proprietorship |
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D. operation |
If total assets are $30,000 and total liabilities are $18,000, Capital must equal __________.
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A. $12,000 |
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B. $28,000 |
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C. $8,000 |
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D. $20,000 |
Logan’s Motor Sports buys $30,000 of equipment on credit. Which of the following is a true statement?
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A. Total assets increase. |
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B. Total assets are unchanged. |
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C. Total liabilities decrease. |
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D. Total liabilities are unchanged. |
Bonnie’s Baskets purchases $4,000 worth of office equipment on account. This causes
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A. Cash and Capital to decrease. |
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B. Office Equipment and Accounts Payable to increase. |
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C. Office Equipment to decrease and Accounts Payable to increase. |
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D. Accounts Payable to increase and Capital to decrease. |
If total liabilities are $18,000 and owner’s equity is $21,000, the total assets must be __________.
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A. $39,000 |
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B. $5,000 |
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C. $20,000 |
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D. $17,000 |
A partnership is a business that is __________.
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A. easy to form |
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B. ends with the death of a partner |
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C. owned by more than one person |
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D. All of these answers are correct. |
If total liabilities increased by $6,000 and the assets increased by $8,000 during the accounting period, what is the change in the owner’s equity amount?
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A. increase of $2,000 |
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B. decrease of $2,000 |
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C. increase of $10,000 |
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D. decrease of $10,000 |
Katie’s Vegetarian Restaurant, with total assets of $90,000, borrows $15,000 from the bank. Which of the following is a true statement upon borrowing the money?
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A. Total assets are now $105,000. |
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B. Total assets are now $80,000. |
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C. Total assets are now $15,000. |
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D. Total assets are now $75,000. |
The claims of creditors against the assets are __________.
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A. expenses |
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B. revenues |
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C. liabilities |
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D. owner’s equity |
Which is an advantage of a sole proprietorship form of business?
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A. There is limited personal risk. |
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B. The business can continue indefinitely. |
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C. The owner makes all the decisions. |
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D. All of these answers are correct.
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Larry’s Landscaping has total liabilities of $1,650 and assets of $2,500. The amount of the owner’s equity is __________.
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A. $4,150 |
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B. $2,500 |
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C. $850 |
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D. $1,650 |
Which of the following items are on both the balance sheet and the statement of owner’s equity?
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A. Net loss |
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B. Capital |
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C. Additional owner’s investments |
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D. Owner’s withdrawals |
A revenue should be recorded when __________.
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A. it is earned |
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B. payment is received |
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C. the invoice is sent to the customer |
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D. None of the above answers are correct. |
Go Blue Retail Store collected $12,000 of its accounts receivable. The expanded accounting equation changes include __________.
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A. cash and capital increase, $12,000 |
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B. cash and revenue increase, $12,000 |
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C. cash increases and accounts receivable decreases $12,000 |
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D. accounts receivable decreases and capital increases $12,000 |
BPK Industries has a net income for the period of $2,500. The balance in the Owner’s Capital account for the beginning of the period is $5,000 and the owner has withdrawn $1,650 for personal expenses. The balance in the Owner’s Capital account at the end of the period will be __________.
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A. $5,850 |
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B. $7,500 |
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C. $850 |
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D. $9,150 |
An accounting report that shows the changes in capital during the accounting period is __________.
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A. a balance sheet |
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B. an income statement |
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C. a statement of owner’s equity |
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D. All of these answers are correct. |
Which of the following is included in the balance sheet?
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A. revenue |
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B. salaries expense |
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C. utilities expense |
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D. accounts payable |
Which accounts are affected when the company buys supplies on account?
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A. assets and capital |
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B. liabilities and capital |
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C. assets and liabilities |
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D. None of the above answers are correct. |
Which statement is prepared for only one date?
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A. Income Statement |
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B. Statement of Cash Flows |
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C. Balance Sheet |
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D. Statement of Owner’s Equity |
The statement of owner’s equity contains the __________.
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A. owner’s capital for the beginning of the period |
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B. liabilities of the company |
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C. total amount owed by credit customers |
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D. balance in the cash account |
The financial statement that shows business results in terms of revenue and expenses is __________.
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A. an income statement |
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B. a balance sheet |
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C. a statement of owner’s equity |
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D. the statement of cash flows |
If a company’s revenues are higher than its expenses, it will cause __________.
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A. an increase in owner’s equity |
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B. a decrease in owner’s equity |
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C. an increase in assets |
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D. no effect on owner’s equity |
When services are rendered but payment is not made, which account would be increased?
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A. accounts receivable |
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B. accounts payable |
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C. cash |
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D. withdrawal |
Which financial statement is considered a link between the income statement and balance sheet?
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A. Statement of Cash Flows |
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B. Statement of Company Assets |
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C. Statement of Company Liquidity |
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D. Statement of Owner’s Equity |
If ‘Ol Fashioned Toys’ revenues are less than its expenses during the accounting period, then __________.
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A. owner’s withdrawals decrease net income |
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B. net income causes liabilities to decrease |
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C. the business will incur a loss |
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D. owner’s withdrawals increase owner’s equity |
Carrie billed her legal clients $6,000 for legal work completed during the month. This transaction will __________.
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A. cause a $6,000 increase in revenues and liabilities |
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B. cause a $6,000 increase in revenues and a decrease in liabilities |
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C. cause a $6,000 increase in assets and revenues |
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D. not be recorded until the cash is collected |
The increase or decrease in the owner’s equity is reported on the __________.
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A. income statement |
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B. statement of owner’s equity |
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C. balance sheet |
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D. All of these answers are correct. |
The financial statement that shows revenue and expenses for a period of time is the __________.
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A. balance sheet |
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B. income statement |
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C. statement of owner’s equity |
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D. statement of cash flows |
A company has the following balances in its asset accounts: Cash, $750; Accounts Receivable, $125; Equipment, $2,000; Supplies, $875. The amount of the company’s total assets is __________.
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A. $875 |
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B. $1,750 |
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C. $2,875 |
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D. $3,750 |
An expense should be recorded when __________.
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A. the bill is paid |
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B. the expense is incurred |
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C. a bill is received in the mail |
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D. None of the above answers are correct. |
