Financial Accounting

How does the purchase of office equipment on account affect the accounting equation?

A. assets increase; liabilities decrease
B. assets increase; owner's equity increases
C. assets increase; liabilities increase
D. liabilities increase; owner's equity decreases

A purchase of a vehicle for cash would have what effect on the accounting equation?

A. Total asset amount remains the same.
B. Total liabilities are overstated.
C. Total owner's equity is overstated.
D. Both A and B are correct.

The purchase of supplies for cash would affect which account category?

A. assets
B. liabilities
C. capital
D. expense

Which of the following transactions would cause one asset to increase and another asset to decrease?

A. The owner invested cash in the business.
B. The business paid a creditor.
C. The business incurred an expense on credit.
D. The business bought supplies for cash.

A corporation __________.

A. can continue indefinitely
B. is owned by stockholders
C. has limited risk to stockholders
D. All of these answers are correct.

Assets are equal to __________.

A. liabilities + owner's equity
B. liabilities - owner's equity
C. liabilities - revenues
D. revenues - expenses

Mary invested cash in her new business. What effect will this have?

A. increase an asset and increase a liability
B. decrease an asset and increase a liability
C. increase an asset and increase owner's equity
D. increase an asset and decrease owner's equity

The Sarbanes-Oxley Act was passed to __________.

A. prevent fraud at public companies
B. replace all of the old accounting procedures with new ones
C. improve the accuracy of the company's financial reporting
D. Both A and C are correct.

Which of the following will be recorded in the owner's equity column as an increase?

A. an exchange of assets
B. the purchase of an asset on credit
C. an investment by the owner
D. a withdrawal by the owner

Which of the following is not a type of business organization?

A. corporation
B. partnership
C. sole proprietorship
D. operation

If total assets are $30,000 and total liabilities are $18,000, Capital must equal __________.

A. $12,000
B. $28,000
C. $8,000
D. $20,000

Logan's Motor Sports buys $30,000 of equipment on credit. Which of the following is a true statement?

A. Total assets increase.
B. Total assets are unchanged.
C. Total liabilities decrease.
D. Total liabilities are unchanged.

Bonnie's Baskets purchases $4,000 worth of office equipment on account. This causes

A. Cash and Capital to decrease.
B. Office Equipment and Accounts Payable to increase.
C. Office Equipment to decrease and Accounts Payable to increase.
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 __________.

A. $39,000
B. $5,000
C. $20,000
D. $17,000

A partnership is a business that is __________.

A. easy to form
B. ends with the death of a partner
C. owned by more than one person
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?

A. increase of $2,000
B. decrease of $2,000
C. increase of $10,000
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?

A. Total assets are now $105,000.
B. Total assets are now $80,000.
C. Total assets are now $15,000.
D. Total assets are now $75,000.

The claims of creditors against the assets are __________.

A. expenses
B. revenues
C. liabilities
D. owner's equity

Which is an advantage of a sole proprietorship form of business?

A. There is limited personal risk.

B. The business can continue indefinitely.

C. The owner makes all the decisions.

D. All of these answers are correct.
The balance sheet contains __________.

A. liabilities, expenses and capital
B. assets, liabilities and revenues
C. expenses, assets and cash
D. assets, liabilities and owner's equity

Larry’s Landscaping has total liabilities of $1,650 and assets of $2,500. The amount of the owner’s equity is __________.

A. $4,150
B. $2,500
C. $850
D. $1,650

Which of the following items are on both the balance sheet and the statement of owner's equity?

A. Net loss
B. Capital
C. Additional owner's investments
D. Owner's withdrawals

A revenue should be recorded when __________.

A. it is earned
B. payment is received
C. the invoice is sent to the customer
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 __________.

A. cash and capital increase, $12,000
B. cash and revenue increase, $12,000
C. cash increases and accounts receivable decreases $12,000
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 __________.

A. $5,850
B. $7,500
C. $850
D. $9,150

An accounting report that shows the changes in capital during the accounting period is __________.

A. a balance sheet
B. an income statement
C. a statement of owner's equity
D. All of these answers are correct.

Which of the following is included in the balance sheet?

A. revenue
B. salaries expense
C. utilities expense
D. accounts payable

Which accounts are affected when the company buys supplies on account?

A. assets and capital
B. liabilities and capital
C. assets and liabilities
D. None of the above answers are correct.

Which statement is prepared for only one date?

A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Owner’s Equity

The statement of owner’s equity contains the __________.

A. owner’s capital for the beginning of the period
B. liabilities of the company
C. total amount owed by credit customers
D. balance in the cash account

The financial statement that shows business results in terms of revenue and expenses is __________.

A. an income statement
B. a balance sheet
C. a statement of owner's equity
D. the statement of cash flows

If a company's revenues are higher than its expenses, it will cause __________.

A. an increase in owner's equity
B. a decrease in owner's equity
C. an increase in assets
D. no effect on owner's equity

When services are rendered but payment is not made, which account would be increased?

A. accounts receivable
B. accounts payable
C. cash
D. withdrawal

Which financial statement is considered a link between the income statement and balance sheet?

A. Statement of Cash Flows
B. Statement of Company Assets
C. Statement of Company Liquidity
D. Statement of Owner’s Equity

If 'Ol Fashioned Toys' revenues are less than its expenses during the accounting period, then __________.

A. owner's withdrawals decrease net income
B. net income causes liabilities to decrease
C. the business will incur a loss
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 __________.

A. cause a $6,000 increase in revenues and liabilities
B. cause a $6,000 increase in revenues and a decrease in liabilities
C. cause a $6,000 increase in assets and revenues
D. not be recorded until the cash is collected

The increase or decrease in the owner's equity is reported on the __________.

A. income statement
B. statement of owner's equity
C. balance sheet
D. All of these answers are correct.

The financial statement that shows revenue and expenses for a period of time is the __________.

A. balance sheet
B. income statement
C. statement of owner's equity
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 __________.

A. $875
B. $1,750
C. $2,875
D. $3,750

An expense should be recorded when __________.

A. the bill is paid
B. the expense is incurred
C. a bill is received in the mail
D. None of the above answers are correct.

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