Deck 2: Analyzing Business Transactions

Question 1

For statements prepared on plain paper, dollar signs are placed with the first amount in each column and with each total.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

Withdrawals by the owner are reported on the income statement.

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

Revenue is recorded when cash is collected from charge-account clients.

Question 11

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

Question 12

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 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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 20

A creditor's claim against the firm's property lasts until the debt is paid.

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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 39

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

Question 40

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

Question 41

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

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

Question 42

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 43

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 44

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 45

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 46

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 47

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 48

If liabilities are $4,000 and owner's equity is $15,000, assets are

A) $9,000.
B) $15,000.
C) $19,000.
D) $4,000.

Question 49

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 50

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 51

The total assets for the SloMo Delivery Service are

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

Question 52

The rent paid for future months is a(n)

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

Question 53

The total amount of Liabilities is

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

Question 54

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 55

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 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

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 58

If the income statement covered a six-month period ending on November 30, 2010, the third line of the income statement heading would read

A) Month Ended November 30, 2010.
B) November 30, 2010.
C) Six-month Period Ended November 30, 2010.
D) Month of November, 2010.

Question 59

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

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

Question 60

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 61

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 62

In order to analyze the effect of a business transaction one must do all of the following except

A) identify the property.
B) identify who owns the property.
C) determine which asset, liability, or equity accounts will change.
D) determine the amount of increase or decrease.

Question 63

The balance sheet shows each of the following except the

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

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.
Purchased a computer for cash

Question 65

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 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.
Paid cash for utilities

Question 67

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?

Question 68

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 69

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 70

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 71

On December 1, 2013, 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.
Performed services on credit

Question 73

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

Question 74

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 invested in the business.
D) the revenues less the expenses.

Question 75

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 76

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 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.
Purchased furniture on credit

Question 78

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.
The owner made an additional investment of cash

Question 79

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 80

The current worth of an asset is its

A) original cost.
B) cost less accumulated depreciation.
C) asking price when put up for sale.
D) fair market value.