Question 1

The accounting equation for Gudgeyes Enterprises is as follows:  If Gudgeyes purchases office equipment on account for $12,000, the accounting equation will change to

Accepted Answer

The answer of The accounting equation for Gudgeyes Enterprises is...

Question 2

Owner's equity is decreased by all of the following except

Accepted Answer

Owner's investments increase owner's equity because they represent additional capital being put into the business by the owner. Withdrawals, expenses, and drawings all decrease owner's equity.

Question 3

If total liabilities increased by $4,000, then

Accepted Answer

The fundamental accounting equation is Assets = Liabilities + Owner's Equity. If total liabilities increased by $4,000, then either assets must have also increased by $4,000 or owner's equity must have decreased by $4,000 to maintain the equation. Option A is incorrect because total assets could have remained unchanged or even increased while liabilities increased. Option B is incorrect because an increase in liabilities would not lead to an increase in owner's equity. Option D is incorrect because it assumes that both assets and owner's equity increased, which is not necessarily true.

Question 4

If total liabilities decreased by $25,000 and owner's equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

According to the accounting equation (Assets = Liabilities + Owner's Equity), if liabilities decrease by $25,000 and owner's equity increases by $5,000, assets must decrease by $20,000 to keep the equation balanced.

Question 5

If total liabilities decreased by $15,000 and owner's equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

According to the accounting equation (Assets = Liabilities + Owner's Equity), if liabilities decrease by $15,000 and owner's equity increases by $5,000, then assets must decrease by $10,000 to keep the equation balanced.

Question 6

If total liabilities increased by $14,000 during a period of time and owner's equity decreased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)

Accepted Answer

According to the accounting equation (Assets = Liabilities + Owner's Equity), if liabilities increase by $14,000 and owner's equity decreases by $6,000, the net effect on assets is an increase of $8,000.

Question 7

Revenues are

Accepted Answer

Revenues are defined as gross increases in owner's equity resulting from business activities, such as sales of goods or services. This definition excludes options A, C, and D, which all relate to expenses or outflows of resources.

Question 8

If supplies that have been purchased are used in the course of business, then

Accepted Answer

When supplies are used in the course of business, it represents an expense. Expenses decrease owner's equity because they reduce the net income, which in turn reduces the owner's claim on the business assets.

Question 9

If total liabilities increased by $15,000 and owner's equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

The accounting equation is Assets = Liabilities + Owner's Equity. If liabilities increased by $15,000 and owner's equity increased by $5,000, then the total increase in these two accounts is $20,000. Since both sides of the equation must balance, total assets must also increase by $20,000, making the correct answer choice B, $20,000 increase.

Question 10

As of June 30, 2009, Dallas Company has assets of $100,000 and owner's equity of $5,000. What are the liabilities for Dallas Company as of June 30, 2009?

Accepted Answer

The answer of As of June 30, 2009, Dallas Company...

Question 11

If an owner makes a withdrawal of cash from a proprietorship, then

Accepted Answer

When an owner makes a withdrawal of cash, it reduces the amount of cash and also reduces the owner's equity in the business. Therefore, the correct choice is C. There is no violation of accounting principles, and a new liability does not arise from this transaction.

Question 12

Collection of a $500 Accounts Receivable

Accepted Answer

The collection of accounts receivable increases the asset account as it is now cash, and decreases the accounts receivable account as the amount has been collected. There is no change in liabilities or owner's equity.

Question 13

If expenses are paid in cash, then

Accepted Answer

Expenses are recorded as decreases to assets (usually cash) and increases to expenses. Therefore, if expenses are paid in cash, assets will decrease as cash is being used to pay the expenses.

Question 14

As of December 31, 2009, Sievers Company has assets of $35,000 and owner's equity of $20,000. What are the liabilities for Sievers Company as of December 31, 2009?

Accepted Answer

Liabilities can be calculated using the accounting equation: Assets = Liabilities + Owner's Equity. Therefore, Liabilities = Assets - Owner's Equity = $35,000 - $20,000 = $15,000.

Question 15

If services are rendered for credit, then

Accepted Answer

The answer of If services are rendered for credit, then
...

Question 16

Owner's equity is increased by

Accepted Answer

Owner's equity is increased by revenues. Revenues are the inflows of economic resources (or an increase in assets) resulting from the sale of goods or services.

Question 17

If an individual asset is increased, then

Accepted Answer

If an individual asset is increased, then there must be an equal decrease in another asset. This is known as the "conservation of assets" principle in accounting. The total assets of a business remain the same, but the composition or allocation of those assets can change. For example, if a company purchases a new delivery truck (increasing the "vehicles" asset account), but then sells an old delivery truck (decreasing the "vehicles" asset account), the total assets of the company do not change.

Question 18

Owner's equity is decreased by

Accepted Answer

Owner's equity is decreased by expenses, which are costs incurred by the business in order to generate revenue. Expenses reduce the company's profitability and, therefore, reduce the amount of owner's equity in the business. Assets, revenues, and liabilities do not directly decrease owner's equity.

Question 19

A net loss will result during a time period when

Accepted Answer

A net loss occurs when expenses exceed revenues for a particular time period, indicating that the company did not generate enough income to cover its costs. Options A and B are not necessarily indicative of a loss, as they are just examples of negative balances in specific accounts. Option D indicates a net income, which is the opposite of a net loss.

Question 20

If total liabilities decreased by $15,000 and owner's equity decreased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

The answer of If total liabilities decreased by $15,000 and...

Quiz 1: Accounting in Action

The accounting equation for Gudgeyes Enterprises is as follows: If Gudgeyes purchases office equipment on account for $12,000, the accounting equation will change to