Deck 2: Analyzing Business Transactions

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

Withdrawals by the owner are reported on the income statement.

Question 11

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

Question 12

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

Question 13

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.

Question 14

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

Question 15

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

Question 16

Which of the following equations is the Fundamental Accounting Equation?

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

Examples of assets are:

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

Question 22

Ginger Yale Ice Company receives money from a customer on account. Recording this transaction will:

A)decrease Accounts Payable.
B)increase Cash.
C)increase Accounts Receivable.
D)decrease G. Yale, Capital.

Question 23

Total assets of Douglas Fuhr Furniture Co. are $84,000 and the total liabilities are $37,000. What is the amount of the owner's equity?

A)$47,000
B)$121,000
C)$84,000
D)$6,000

Question 24

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,350; Prepaid Insurance, $400; Equipment, $26,200 and Cash, $21,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,000; Allen Office Equipment, $14,500.
The total amount of Liabilities is:

A)$17,000.
B)$14,500.
C)$28,100.
D)$31,500.

Question 25

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,350; Prepaid Insurance, $400; Equipment, $26,200 and Cash, $21,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,000; Allen Office Equipment, $14,500.
The total assets for the SloMo Delivery Service are:

A)$59,600.
B)$21,650.
C)$33,400.
D)$33,000.

Question 26

A net loss results:

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

Question 27

If the income statement covered a six-month period ending on November 30, 2019, the third line of the income statement heading would read:

A)Month of November, 2019.
B)November 30, 2019.
C)Six-month Period Ended November 30, 2019.
D)Month Ended November 30, 2019.

Question 28

When equipment is purchased on credit,

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

Question 29

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

Question 30

The income statement shows:

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

Question 31

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

A)capital.
B)liabilities.
C)expenses.
D)assets.

Question 32

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

Question 33

If a business issues a check for $100 to purchase office supplies, What is the effect on the accounting equation?

A)Owner's Equity will decrease
B)Assets will decrease
C)Owner's Equity will increase
D)Total Assets will remain the same

Question 34

When the owner invests equipment in a business,

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

Question 35

The Income Statement shows:

A)the financial position of a business at a given time.
B)the change in owner's equity for a period of time.
C)the amount of net income or net loss.
D)assets, liabilities and expenses.

Question 36

The owner's investment or equity in a business is called:
A)accounts payable.

A)cash.
B)drawing.
D)capital.

Question 37

The balance sheet shows:

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

Question 38

Which financial statement is reported as of a specific date?

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

Question 39

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

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

Question 40

When equipment is purchased for cash,

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

Question 41

The balance sheet shows each of the following except the:

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

Question 42

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

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

Question 43

Which financial statement is a representation of the accounting equation?
A)Balance Sheet

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

Question 44

Owner's equity is:

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

Question 45

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

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

Question 46

Assets and liabilities are reported on:

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

Question 47

When the owner withdraws cash for personal use,

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

Question 48

The Balance Sheet heading includes each of the following except:

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

Question 49

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

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

Question 50

The financial statement that is prepared first is:

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

Question 51

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

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

Question 52

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

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

Question 53

At the end of its first year of operations, Shapiro's Consulting Services reported net income of
$27,000. They also had account balances of: Cash, $16,000; Office Supplies, $3,200, Equipment,
$24,000 and Accounts Receivable, $8,000. The owner's total investment for this first year was
$15,000 and the owner withdrew $2,000 for personal use. Calculate the ending balance to be reported on the Statement of Owner's Equity in the Owner's Capital account.

A)$40,000
B)$42,200
C)$58,000
D)$27,000

Question 54

The rent paid for future months is a(n):

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

Question 55

At the end of the first month of operations for Jackson's Catering Service, the business had the following accounts: Cash, $21,000; Prepaid Rent, $500; Equipment, $7,500 and Accounts Payable
$4,000. By the end of the month, Jackson's had earned $32,000 of Revenues, and used $1,800 of Utilities Expenses, $4,000 of Rent Expense and $3,600 of Salaries Expenses. Calculate the net income to be reported by the company for this first month.

A)$32,000
B)$26,200
C)$22,600
D)$23,100

Question 56

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

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

Question 57

An Income Statement is all of the following except:

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

Question 58

Which of the following is an example of an expense:

A)an owner withdrawal for personal use.
B)the payment of the monthly utility bill.
C)the receipt of cash from a credit customer.
D)the payment of a creditor on account.

Question 59

At the end of its first year of operations, Shapiro's Consulting Services reported net income of
$27,000. They also had account balances of: Cash, $16,000; Office Supplies, $3,200; Equipment,
$24,000 and Accounts Receivable, $8,000. The owner's total investment for this first year was
$15,000 and the owner withdrew $2,000 for personal use.
What are the total liabilities of Shapiro's Consulting Services at the end of the first year of operations?

A)$24,200
B)$11,200
C)$42,000
D)$27,000

Question 60

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

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

Question 61

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

Question 62

In a business transaction, when expenses increase, owner's equity will ________.

Question 63

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 $1,600 for rent for October
Provided services for $4,750 in cash
Paid $350 for the October telephone service
Provided services for $1,700 on credit
Paid salaries of $2,675 to employees
Paid $350 for the monthly office cleaning service

Question 64

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

Question 65

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

Question 66

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

Question 67

On the income statement, revenues minus expenses equals ________ for a period of time.

Question 68

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

Question 69

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

Question 70

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

Question 71

The ________ reports the changes that have occurred in the owner's financial interest during the accounting period.

Question 72

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

Question 73

In a business transaction, when revenue increases, owner's equity will ________ .

Question 74

Revenue by definition is:

A)the collection of amounts owed by customers.
B)an amount a business must pay in the future.
C)the payment of amounts owed to creditors.
D)amounts earned from the sale of goods or services.

Question 75

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

Question 76

On December 1, 2019, 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 77

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

Question 78

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

Question 79

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

Question 80

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