Deck 2: Analyzing Business Transactions

Question 1

A withdrawal of funds by the owner for personal use is considered a business expense.

Answer 1

False

Question 2

Al Dunn Bakery bought a new oven for $1,380.Al paid $300 as a cash down payment and will pay the balance in 30 days.Total assets increased by $1,080.

Answer 2

True

Question 3

The statement of owner's equity is prepared before the balance sheet so that the ending capital balance is available.

Answer 3

True

Question 4

When using the fundamental accounting equation,an accountant must make sure that total assets are always equal to total liabilities and owner's equity.

Question 5

Withdrawals by the owner are reported on the income statement.

Question 6

If the owner takes cash out of the business for personal use,the withdrawal should be recorded as an expense of the business.

Question 7

A business transaction is a financial event that affects the resources of a business.

Question 8

A double line drawn under the figures in a money column shows that the computation is complete.

Question 9

The income statement is also known as the profit and loss statement.

Question 10

The property that a business owns is referred to as its ___________________.

Question 11

The amount of net income or net loss is needed to complete the statement of owner's equity.

Question 12

The net income or net loss for the period is shown on both the income statement and the balance sheet.

Question 13

The entire process of analyzing,recording,and reporting business transactions is based on the fundamental accounting equation.

Question 14

When cash is collected from accounts receivable,the total amount of assets increases.

Question 15

When cash is paid to a creditor,the firm's liabilities decrease.

Question 16

A company has assets of $56,320 and liabilities of $29,500.The owner's equity is $85,820.

Question 17

Assets always equal debts of the business plus the financial interest of the owner.

Question 18

If assets are $8,000 and liabilities are $2,000,owner's equity is $10,000.

Question 19

The expenses for a period are reported on the balance sheet.

Question 20

If there is an excess of expenses over revenues,the excess represents a profit.

Question 21

If a business issues a check for $100 to purchase office supplies,analyze the effect on the accounting equation.

A) Financial Interest will increase
B) Property will decrease
C) Financial Interest will decrease
D) Total Property will remain the same

Question 22

The account used to record amounts that are owed for goods or services purchased on credit are known as ___________________.

Question 23

When revenue and expenses are equal,the firm is said to ___________________.

Question 24

Amounts that a business must pay in the future are known as

A) accounts receivable.
B) accounts payable.
C) capital.
D) expenses.

Question 25

If assets are $17,000 and owner's equity is $10,000,liabilities are ___________________.

Question 26

The account used to record amounts that will be collected from charge account customers in the future are referred to as ___________________.

Question 27

The three-line heading of a financial statement shows who,what,and ___________________.

Question 28

The balance sheet shows

A) the results of business operations.
B) all revenues and expenses.
C) the amount of net income or loss.
D) the financial position of a business at a given time.

Question 29

If a business issued a check for $1,000 to pay for two months rent in advance,analyze the effect on the firms' assets,liabilities and owner's equity.

A) Cash will increase
B) Accounts Payable will decrease
C) Prepaid Rent will increase
D) Owner's Capital will increase

Question 30

The statement of ____________________ reports the changes that have occurred in the owner's financial interest during the reporting period.

Question 31

The ____________________ is the financial report that shows the assets,liabilities,and owner's equity of a business on a specific date.

Question 32

The financial interest of the owner in a business is called owner's equity or ___________________.

Question 33

The debts or obligations of a business are known as its ___________________.

Question 34

Funds taken from the business by the owner for personal use are called ___________________.

Question 35

When a business pays cash for salaries,assets decrease and expenses ___________________.

Question 36

When revenue is greater than expenses,the result is a net ___________________.

Question 37

When a business sells services for cash,assets increase and revenue ___________________.

Question 38

Examples of assets are:

A) cash and accounts receivable.
B) cash and revenue.
C) cash and rent expense.
D) investments by the owner and revenue.

Question 39

The owner's investment or equity in a business is called

A) cash.
B) drawing.
C) capital.
D) accounts payable.

Question 40

The income statement shows revenue,___________________,and net income or net loss for a period of time.

Question 41

The financial statement that is prepared first is

A) up to the accountant.
B) the income statement.
C) the balance sheet.
D) the statement of owner's equity.

Question 42

When the owner invests cash in a business,

A) assets and revenue increase.
B) assets increase and owner's equity decreases.
C) liabilities decrease and owner's equity increases.
D) assets and owner's equity increase.

Question 43

When equipment is purchased for cash,

A) assets decrease and expenses increase.
B) one asset increases and another asset decreases.
C) assets and owner's equity increase.
D) assets increase and liabilities decrease.

Question 44

Total assets of Douglas Fuhr Furniture Co.are $36,000 and the total liabilities are $12,000.What is the amount of the owner's equity?

A) $36,000
B) $24,000
C) $48,000
D) $6,000

Question 45

At the end of the first month of operations for SloMo Delivery Service,the business had the following accounts: Accounts Receivable,$1,200;Prepaid Insurance,$500;Equipment,$36,200 and Cash,$40,650.On the same date,SloMo owed the following creditors: Simpson Supply Company,$12,000;Allen Office Equipment,$9,500. The total assets for the SloMo Delivery Service are

A) $42,350.
B) $78,550.
C) $76,850.
D) $41,850.

Question 46

When equipment is purchased on credit,

A) assets and liabilities increase.
B) assets increase and liabilities decrease.
C) assets and owner's equity increase.
D) assets and expenses increase.

Question 47

A net loss results

A) when expenses are greater than revenue.
B) when assets are greater than liabilities.
C) when revenue is greater than expenses.
D) when expenses are greater than assets.

Question 48

At the end of the first month of operations for SloMo Delivery Service,the business had the following accounts: Accounts Receivable,$1,200;Prepaid Insurance,$500;Equipment,$36,200 and Cash,$40,650.On the same date,SloMo owed the following creditors: Simpson Supply Company,$12,000;Allen Office Equipment,$9,500. The total amount of Liabilities is

A) $36,200.
B) $9,500.
C) $21,500.
D) $40,650.

Question 49

If the income statement covered a six-month period ending on November 30,2013,the third line of the income statement heading would read

A) Month Ended November 30,2013.
B) November 30,2013.
C) Six-month Period Ended November 30,2013.
D) Month of November,2013.

Question 50

The income statement shows

A) the financial position of a business on a specific date.
B) revenue and owner's equity.
C) the results of operations for a period of time.
D) the total value of the business.

Question 51

Identify the account below that is classified as an asset account and would appear on the left side of the accounting equation.

A) Accounts Receivable.
B) Owner's Capital.
C) Accounts Payable.
D) Revenue.

Question 52

The rent paid for future months is a(n)

A) asset.
B) liability.
C) expense.
D) revenue.

Question 53

When the owner writes a company check to pay the firm's electric bill,

A) assets and owner's equity increase.
B) assets decrease and expenses increase.
C) assets and liabilities decrease.
D) expenses increase and owner's equity increases.

Question 54

When the owner withdraws cash for personal use,

A) assets decrease and expenses increase.
B) assets decrease and owner's equity increases.
C) assets decrease and owner's equity decreases.
D) owner's equity decreases and revenue decreases.

Question 55

If during the year total assets increase by $75,000 and total liabilities decrease by $16,000,by how much did owner's equity increase/decrease?

A) $91,000 increase
B) $59,000 decrease
C) $91,000 decrease
D) $75,000 increase

Question 56

The statement of financial position is another term for which financial statement?

A) Income Statement
B) Statement of Owner's Equity
C) Balance Sheet
D) Trial Balance

Question 57

Which financial statement is reported as of a specific date?

A) Balance Sheet
B) Statement of Owner's Equity
C) Income Statement
D) Statement of Changes in Financial Position

Question 58

Assets and liabilities are reported on

A) the balance sheet.
B) the income statement.
C) the statement of owner's equity.
D) both the balance sheet and the income statement.

Question 59

Which financial statement is a representation of the accounting equation?

A) Income Statement
B) Statement of Owner's Equity
C) Balance Sheet
D) Profit and Loss Statement

Question 60

If a business receives $5,000 on account from clients who owed money for services previously billed,identify the effect on the accounting equation

A) assets decrease and liabilities increase.
B) liabilities decrease and owner's equity decreases.
C) assets remain the same and owner's equity remains the same.
D) owner's equity increases and revenue increases.

Question 61

During October,a firm had the following transactions involving revenue and expenses.Did the firm earn a net income or incur a net loss for the period? What was the amount?
Paid $1,200 for rent
Provided services for $2,750 in cash
Paid $250 for telephone service
Provided services for $1,900 on credit
Paid salaries of $1,675 to employees
Paid $350 for office cleaning service

Question 62

Given the options below,identify the correct accounting equation formula.

A) Assets = Liabilities + Owner's Equity
B) Liabilities = Assets + Owner's Equity
C) Assets + Liabilities = Owner's Equity
D) Assets + Owner's Equity = Liabilities

Question 63

The transactions listed below took place at the Mitchell Advertising Agency.These transactions affected the following accounts.Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. Paid cash for utilities

Question 64

The transactions listed below took place at the Mitchell Advertising Agency.These transactions affected the following accounts.Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. Received cash from credit customers

Question 65

Choose the option below that reflects the correct order in which to prepare the three financial statements

A) Balance Sheet;Income Statement;Statement of Owner's Equity.
B) Income Statement;Statement of Owner's Equity;Balance Sheet.
C) Income Statement;Balance Sheet;Statement of Owner's Equity.
D) Statement of Owner's Equity;Balance Sheet;Income Statement.

Question 66

The transactions listed below took place at the Mitchell Advertising Agency.These transactions affected the following accounts.Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. Performed services on credit

Question 67

At the end of its first year of operations,Shapiro's Consulting Services reported net income of $25,000.They also had account balances of: Cash,$18,000;Office Supplies,$2,000 and Accounts Receivable $10,000.The owner's total investment for this first year was $5,000.Calculate the ending balance to be reported on the Statement of Owner's Equity in the Owner's Capital account.

A) $30,000
B) $25,000
C) $20,000
D) $5,000

Question 68

An Income Statement is all of the following except:

A) a formal report of business operations.
B) a profit and loss statement.
C) a statement of revenues less withdrawals and expenses.
D) a statement of income and expenses.

Question 69

Identify the type of accounts that would appear on a firm's income statement

A) assets and liabilities.
B) revenues and expenses.
C) assets and revenues.
D) liabilities and expenses.

Question 70

At the end of the first month of operations for Jackson's Catering Service,the business had the following accounts: Cash,$19,000;Prepaid Rent,$500;Equipment,$5,000 and Accounts Payable $2,000.By the end of the month,Jackson's had earned $20,000 of Revenues,$1,000 of Utilities Expenses and $1,500 of Salaries Expenses.Calculate the net income to be reported by the company for this first month.

A) $20,000
B) $19,000
C) $17,500
D) $12,000

Question 71

On December 1,2016,Geneva Jordan opened her new business with the following assets and liabilities.Complete the accounting equation for the firm. Assets $________ = Liabilities $________ + Owner's Equity $________

Question 72

The transactions listed below took place at the Mitchell Advertising Agency.These transactions affected the following accounts.Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. Sent a check to a creditor

Question 73

Owner's equity is:

A) the amount taken out of a business by the owner for personal use.
B) the financial interest of the owner of a business.
C) the amount the owner owes the business.
D) the revenues less the expenses.

Question 74

An expense by definition is not:

A) an amount a business must pay in the future.
B) an outflow of cash.
C) the use of other assets.
D) the incurring of a liability.

Question 75

The Statement of Owner's Equity is calculated as follows:

A) beginning capital + net income - withdrawals + additional investments = ending capital
B) beginning capital + net loss + withdrawals + additional investments = ending capital
C) beginning capital + net loss - withdrawals + additional investments = ending capital
D) beginning capital + net income + withdrawals + additional investments = ending capital

Question 76

The transactions listed below took place at the Mitchell Advertising Agency.These transactions affected the following accounts.Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. Purchased a computer for cash

Question 77

The transactions listed below took place at the Mitchell Advertising Agency.These transactions affected the following accounts.Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. Issued checks to pay salaries

Question 78

The Balance Sheet heading includes each of the following except:

A) firm's name.
B) firm's address.
C) title of the report.
D) date of the report.

Question 79

The balance sheet shows each of the following except the:

A) net income of the business.
B) amount and types of property the business owns.
C) owner's interest.
D) amount owed creditors.

Question 80

The transactions listed below took place at the Mitchell Advertising Agency.These transactions affected the following accounts.Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. Performed services for cash