Deck 1: The Accounting Equation

Question 1

The accounting equation is most often stated as Assets + Liabilities = Owner's Equity.

Answer 1

False

Question 2

A negative amount for net worth would reflect more debt than assets, something a creditor would favor.

Answer 2

False

Question 3

When two asset accounts are changed in a transaction, there must be an increase and a decrease.

Answer 3

True

Question 4

Detailed information about changes in owner's equity is needed by owners and managers to make sound business decisions.

Question 5

When items are bought and paid for at a future date, another way to state this is to say these items are bought on account.

Question 6

A transaction for the sale of goods or services results in a decrease in owner's equity.

Question 7

Keeping separate the financial records for a business and for its owner's personal belongings is an application of the Business Entity accounting concept.

Question 8

An expense is a decrease in owner's equity resulting from the operation of a business.

Question 9

Business ethics are the principles of right and wrong that guide an individual in making decisions.

Question 10

Payments for advertising, equipment repairs, utilities, and rent are liabilities.

Question 11

Withdrawals are assets taken out of a business for the owner's personal use.

Question 12

The most common type of withdrawal by an owner from a business is the withdrawal of cash.

Question 13

When an owner withdraws cash from the business, the transaction affects both assets and owner's equity.

Question 14

A withdrawal is an expense.

Question 15

Select the one term that best fits each definition.

-A formal report that shows what an individual owns, what an individual owes, and the difference between the two.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 16

Select the one term that best fits each definition.

-Planning, recording, analyzing, and interpreting financial information.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 17

Select the one term that best fits each definition.

-An equation showing the relationship among assets, liabilities, and owner's equity.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 18

Select the one term that best fits each definition.

-A business activity that changes assets, liabilities, or owner's equity.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 19

Select the one term that best fits each definition.

-A planned process for providing financial information that will be useful to management.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 20

Select the one term that best fits each definition.

-The standards and rules that accountants follow while recording and reporting financial activities.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 21

Select the one term that best fits each definition.

-The account used to summarize the owner's equity in the business.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 22

Select the one term that best fits each definition.

-The amount remaining after the value of all liabilities is subtracted from the value of all assets.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 23

Select the one term that best fits each definition.

-A record summarizing all the information pertaining to a single item in the accounting equation.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 24

Select the one term that best fits each definition.

-The difference between personal assets and personal liabilities.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 25

Select the one term that best fits each definition.

-Anything of value that is owned.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 26

Select the one term that best fits each definition.

-A sale for which cash will be received at a later date.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 27

Select the one term that best fits each definition.

-Assets taken out of a business for the owner's personal use.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 28

Select the one term that best fits each definition.

-A formal written document that describes the nature of a business and how it will operate.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 29

Select the one term that best fits each definition.

-A business owned by one person.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 30

Select the one term that best fits each definition.

-The use of ethics in making business decisions.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 31

Select the one term that best fits each definition.

-A business that performs an activity for a fee.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 32

Select the one term that best fits each definition.

-The difference between assets and liabilities.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 33

Select the one term that best fits each definition.

-Financial reports that summarize the financial conditions and operations of business.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 34

Select the one term that best fits each definition.

-An amount owed by a business.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 35

Select the one term that best fits each definition.

-A person or business to whom a liability is owed.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 36

Select the one term that best fits each definition.

-A decrease in owner's equity resulting from the operation of a business.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 37

Select the one term that best fits each definition.

-An increase in owner's equity resulting from the operation of a business.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 38

Select the one term that best fits each definition.

-The amount in an account.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 39

Select the one term that best fits each definition.

-The name given to an account.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals

Question 40

Select the one term that best fits each definition.

-Financial rights to the assets of a business.

A) account
B) account balance
C) account title
D) accounting
E) accounting equation
F) accounting system
G) asset
H) business ethics
I) business plan
J) capital account
K) creditor
L) equities
M) equity
N) expense
O) financial statements
P) GAAP
Q) liability
R) net worth statement
S) owner's equity
T) personal net worth
U) proprietorship
V) revenue
W) sale on account
X) service business
Y) transaction
Z) withdrawals