Deck 1: Asset, Liability, Owners Equity, Revenue, and Expense Accounts

Question 1

Which of the following transactions does not include an increase to expenses?

A) Received and paid the phone bill
B) Paid monthly rent
C) Received cash for services performed
D) Paid the week's wages
E) Bought advertising for cash

Answer 1

C

Question 2

When an owner withdraws cash from the business, it results in a decrease in:

A) Cash and Accounts Receivable.
B) Cash and Contingent Liabilities.
C) Cash and Capital.
D) Cash and Accounts Payable.
E) Cash and Long-term Liabilities.

Answer 2

C

Question 3

Over a period of time, if total assets increase by $27,000 and total liabilities increase by $7,000, then owner's equity will be increased by

A) $7,000.
B) $34,000.
C) $27,000.
D) $20,000.
E) none of these.

Answer 3

D

Question 4

Which of the following is not considered an account?

A) Equipment
B) Revenues
C) Accounts Payable
D) Cash
E) Accounts Receivable

Question 5

Michael has $120,000 invested in his business. The business owes creditors $20,000. Determine the amount of assets in the business.

A) $140,000
B) $120,000
C) $100,000
D) $20,000

Question 6

Which of the following is a form of revenue?

A) A check paying a mortgage
B) A credit purchase invoice
C) Credit sales to charge customers
D) A cash purchase invoice
E) A check paying utilities

Question 7

Rob Cougar Landscaping has assets of $70,000 and equity of $30,000. Determine the amount of liabilities in the business.

A) $100,000
B) $50,000
C) $40,000
D) None of the answers listed

Question 8

Amounts owed by a business are referred to as

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

Question 9

The owner of a business invested $5,000 in the business. What are the effects on the fundamental accounting equation?

A) Assets increase $5,000; liabilities, no effect; owner's equity increases $5,000
B) Assets increase $5,000; liabilities decrease $5,000; owner's equity increases $5,000
C) Assets increase $5,000; liabilities increase $5,000; owner's equity, no effect
D) Assets increase $5,000; liabilities, no effect; owner's equity decreases $5,000
E) Assets decrease $5,000; liabilities, no effect; owner's equity increases $5,000

Question 10

The purchase of an asset (like Equipment) on account will

A) increase total liabilities and decrease total assets.
B) have no effect on total assets or total liabilities.
C) increase total assets and increase total liabilities.
D) increase total assets and increase owner's equity.
E) increase total assets and decrease owner's equity.

Question 11

A business received $600 cash from charge customers to apply on account. The effect of the transaction is an increase in an asset and a(n)

A) increase in revenue.
B) decrease in capital.
C) decrease in a liability.
D) decrease in an asset.
E) increase in capital.

Question 12

The purchase of supplies for cash will

A) increase Supplies and decrease Cash.
B) increase Supplies Expense and decrease Cash.
C) decrease Cash and increase Accounts Payable.
D) increase Supplies Expense and increase Accounts Payable.
E) decrease Cash and increase Capital.

Question 13

When the rent for the business is paid with a check,

A) Cash is decreased and Rent Expense is decreased.
B) Cash is decreased and Rent Income is increased.
C) Cash is decreased and Rent Expense is increased.
D) Cash is decreased and Accounts Payable is decreased.
E) Cash is increased and Rent Expense is decreased.

Question 14

If an owner invests his or her computer, printer, and cash in the business, there is an increase in:

A) Cash and Accounts Payable.
B) Computer Equipment, Accounts Payable, and Drawing.
C) Cash and Drawing.
D) Computer Equipment and Expenses.
E) Computer Equipment, Cash, and Capital

Question 15

The deposit of cash by the owner in the name of the business would involve

A) increasing an asset and increasing a liability.
B) increasing an asset and increasing owner's equity.
C) decreasing an asset and increasing owner's equity.
D) increasing an asset and increasing revenue.

Question 16

Which of the following equations is the fundamental accounting equation?

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

Question 17

Clean and Fresh Laundromat has assets of $120,000 and liabilities of $35,000. Determine the amount of owner's equity.

A) $42,500
B) $155,000
C) $85,000
D) None of the answers listed

Question 18

When a business pays a creditor on account,

A) total assets increase.
B) total assets decrease.
C) total liabilities increase.
D) owner's equity decreases.

Question 19

The purchase of an asset for cash will

A) increase total assets and decrease total liabilities.
B) have no effect on total assets or total liabilities.
C) increase total assets and increase total liabilities.
D) increase total assets and increase total owner's equity.
E) increase total assets and decrease total owner's equity.

Question 20

The owner's right, claim, or financial interest is referred to as

A) assets.
B) business entity.
C) equity.
D) revenues.

Question 21

Professional Fees is a(n)

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

Question 22

Otto Company paid a credit on account, $1,500. Which of the following is true in regards to the fundamental accounting equation?

A) Assets increased by $1,500.
B) Liabilities increased by $1,500.
C) Liabilities decreased by $1,500.
D) Owner's equity increased by $1,500.
E) Owner's equity decreased by $1,500.

Question 23

Newton Company bought equipment, paying cash, $25,000. Which of the following is true in regards to the fundamental accounting equation?

A) Total assets increased by $25,000.
B) Total liabilities increased by $25,000.
C) Total liabilities decreased by $25,000.
D) Total Owner's Equity increased by $25,000.
E) Total assets are unaffected.

Question 24

Bendada deposited $25,000 in a bank account in the name of the business. Which of the following is true in regards to the fundamental accounting equation?

A) Assets increase by $25,000.
B) Liabilities increase by $25,000.
C) Assets decrease by $25,000.
D) Owner's Equity decreases by $25,000.
E) Liabilities decrease by $25,000.

Question 25

Newton Company purchases equipment on account. What are the effects on the fundamental accounting equation?

A) Assets increase; liabilities, no effect; owner's equity increases.
B) Assets increase; liabilities decrease; owner's equity increases.
C) Assets increase; liabilities increase; owner's equity decreases.
D) Assets increase; liabilities increase; owner's equity, no effect.
E) Assets increase; liabilities decrease; owner's equity, no effect.

Question 26

Accounts Payable is a(n)

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

Question 27

The amounts that the business entity owes its creditors are referred to as

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

Question 28

Jerry Frost invested equipment in his business having a fair market value of $23,500. What are the effects on the fundamental accounting equation?

A) Assets increase $23,500; liabilities, no effect; owner's equity increases $23,500.
B) Assets increase $23,500; liabilities decrease $23,500; owner's equity increases $23,500.
C) Assets increase $23,500; liabilities increase $23,500; owner's equity, no effect.
D) Assets decrease $23,500; liabilities, no effect; owner's equity decreases $23,500.
E) Assets decrease $23,500; liabilities, no effect; owner's equity increases $23,500.

Question 29

An example of a liability is

A) Cash.
B) Prepaid Insurance.
C) Rent Expense.
D) Accounts Payable.

Question 30

Prepaid Insurance is a(n)

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

Question 31

Accounts Receivable is a(n)

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

Question 32

A one-owner business is called a

A) corporation.
B) partnership.
C) sole-ownership.
D) sole-proprietorship.

Question 33

When a company pays salaries to an assistant,

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

Question 34

Which of the following is an example of an asset?

A) Prepaid Insurance
B) Accounts Payable
C) Capital
D) Outstanding Rent

Question 35

Which of the following represents the costs that relate to earning revenue?

A) Owner's Equity
B) Expenses
C) Drawing
D) Assets

Question 36

The borrowing of money will

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

Question 37

Petkus Company paid Perkins Products, a creditor, on account, $7,500. What are the effects on the fundamental account equation?

A) Assets increase $7,500; liabilities, no effect; owner's equity increases $7,500.
B) Assets decrease $7,500; liabilities, no effect; owner's equity decreases $7,500.
C) Assets increase $7,500; liabilities decrease $7,500; owner's equity, no effect.
D) Assets decrease $7,500; liabilities decrease $7,500; owner's equity, no effect.
E) Assets decrease $7,500; liabilities increase $7,500; owner's equity, no effect.

Question 38

The liability account ______________ is used for short-term liabilities or charge accounts, usually due within 30 days.

A) Short-term Payable
B) Liability Payable
C) Accounts Payable
D) Accounts Receivable

Question 39

Which of the following is true?

A) Double-entry accounting requires that each transaction be recorded in at least one account.
B) Every transaction is recorded as an increase and/or decrease in two or more accounts.
C) Double-entry accounting requires that each transaction be recorded in only two accounts.
D) After a transaction has been recorded it is acceptable for the accounting equation to be out of balance.

Question 40

The _____________ means that a business is separated from its owners.

A) stand-alone entity concept
B) equity concept
C) separate entity concept
D) fair value concept
E) none of the answers listed

Question 41

Azure Company would record its rent bill for the month, which amounts to $920, as a(n):

A) increase in cash.
B) decrease in accounts payable.
C) increase in expenses.
D) decrease in drawing.

Question 42

Jamie's Lighting Company paid rent for the month, $2,500. What are the effects on the fundamental accounting equation?

A) Assets increase $2,500; liabilities, no effect; owner's equity increases $2,500.
B) Assets decrease $2,500; liabilities, no effect; owner's equity increases $2,500.
C) Assets decrease $2,500; liabilities, decrease $2,500; owner's equity, no effect.
D) Assets decrease $2,500; liabilities, no effect; owner's equity decreases $2,500.

Question 43

The expanded accounting equation is

A) assets = liabilities + capital + drawing + revenue - expenses
B) assets = liabilities - capital + drawing - revenue + expenses
C) assets = liabilities + capital - drawing + revenue - expenses
D) assets + capital = liabilities - drawing + revenue - expenses

Question 44

Expenses are recorded

A) when they are paid.
B) when they are incurred.
C) in advance or when they are due.
D) none of the answers listed.

Question 45

The account ____________ is used to record amounts due from charge customers.

A) cash
B) accounts payable
C) accounts receivable
D) revenue

Question 46

Graves Company bought supplies on credit, $1,800. What are the effects on the fundamental accounting equation?

A) Assets increase $1,800; liabilities, no effect; owner's equity increases $1,800.
B) Assets decrease $1,800; liabilities, no effect; owner's equity decreases $1,800.
C) Assets, no effect; liabilities, increase $1,800; owner's equity decreases $1,800.
D) Assets increase $1,800; liabilities, increase $1,800; owner's equity, no effect.

Question 47

A(n) ______________ is money paid directly to the owner.

A) expense
B) capital investment
C) withdrawal
D) none of the answers listed

Question 48

D. Hoffman withdrew $20,000 for personal use from his business. This transaction should be recorded as a(n):

A) increase in liabilities.
B) increase in revenue.
C) decrease in expenses.
D) decrease in owner's equity.

Question 49

Wages Expense is a(n)

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

Question 50

Palmer Hand Clinic has the following accounts and balances:
Cash, $2,350
Accounts Receivable, $280
Professional Equipment, $1,200
Office Equipment, $6,700
Accounts Payable, $4,380
P.Palmer, Capital, $2,000
Income from Services, $6,000
Rent Expense, $1,850
What is the amount of liabilities?

A) $6,230
B) $1,850
C) $4,380
D) $6,150

Question 51

Magna Company paid $2,400 for a 6-month liability insurance policy. At the time of payment, this transaction should be recorded as

A) Insurance Expense, $2,400.
B) Prepaid Insurance, $2,400.
C) Insurance Expense, $400.
D) Prepaid Insurance, $400.

Question 52

Expenses incurred by a business results in:

A) a decrease in its liabilities.
B) a decrease in the owner's equity.
C) an increase in the drawing.
D) an increase in the assets.

Question 53

When a company receives cash on account from a credit customer, the company should record a(n)

A) increase to Accounts Receivable.
B) decrease to Cash.
C) increase to Revenue.
D) decrease to Accounts Receivable.

Question 54

Harry Dental Clinic has the following accounts and balances:
Cash, $2,000
Accounts Receivable, $1,250
Professional Equipment, $10,200
Office Equipment, $5,500
Accounts Payable, $3,500
P. Palmer, Capital, $10,000
P. Palmer, Drawing, $1,000
Professional fee earned, $18,000
Rent Expense, $12,350
Wage Expense, $1,200
What is the amount of assets in the accounting equation?

A) $10,250
B) $12,350
C) $18,950
D) $16,530

Question 55

Palmer Hand Clinic has the following accounts and balances:
Cash, $2,350
Accounts Receivable, $280
Professional Equipment, $1,200
Office Equipment, $6,700
Accounts Payable, $4,380
P.Palmer, Capital, $2,000
Income from Services, $6,000
Rent Expense, $1,850
What is the amount of owner's equity?

A) $6,150
B) $2,000
C) $8,000
D) $4,150

Question 56

The _____________ is the official list of accounts for the business.

A) chart of accounts
B) account list
C) account title
D) fundamental accounting equation

Question 57

The purchase of office equipment on account would involve a(n)

A) increasing an asset and increasing a liability.
B) decreasing an asset and increasing an asset.
C) decreasing an asset and increasing an expense.
D) increasing an asset and increasing an expense.

Question 58

Ott Company sold services for cash. What are the effects on the fundamental accounting equation?

A) Assets increase; liabilities, no effect; owner's equity increases.
B) Assets decrease; liabilities, no effect; owner's equity increases.
C) Assets increase; liabilities, no effect; owner's equity decreases.
D) Assets increase; liabilities, increase; owner's equity, no effect.

Question 59

Pidcoke Company sold services on account, $23,000. This transactions should be recorded as a(n)

A) increase to cash.
B) decrease to revenue.
C) increase to accounts receivable.
D) increase to accounts payable.

Question 60

The effect of expenses on the fundamental accounting equation is a(n)

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

Question 61

Capital represents the owner's investment, or equity, in a business.

Question 62

Every transaction is recorded in terms of increases and/or decreases in two or more accounts.

Question 63

Equipment is listed as an asset because it is used up in a relatively long period of time.

Question 64

Business transactions are expressed in terms of money.

Question 65

List and explain the four items under the umbrella of owner's equity, including whether it increases or decreases overall equity.

Question 66

The fundamental accounting equation would remain in balance if equal amounts were added to both sides of the equation.

Question 67

An exchange of assets has no effect on the totals of the accounting equation.

Question 68

Assets are things of value owned by a business entity.

Question 69

Double-entry accounting means that, for each transaction, an amount must be added to or subtracted from each side of the equation.

Question 70

The liability created when supplies are bought on account is called an account payable.

Question 71

An owner can invest cash or other assets of value in the business.

Question 72

The first step in analyzing a transaction is to determine what accounts are involved.

Question 73

The owner's Drawing account is listed with the other expenses of a business.

Question 74

Liabilities represent amounts owed to creditors.

Question 75

Both sides of the fundamental accounting equation must always be equal.

Question 76

What is the fundamental accounting equation, including examples of each item of the equation?

Question 77

A withdrawal by the owner is recorded as a deduction from assets and an increase in expenses.

Question 78

Accounts Receivable is considered an asset.

Question 79

In the fundamental accounting equation, assets are added to liabilities.

Question 80

When a business receives cash, it is always recorded as an increase to Cash and a decrease to an Expense.