Deck 1: Accounting Concepts and Procedures

Question 1

Which of the following is a characteristic of a sole proprietorship?

A)Business owned by more than one person
B)Easy to form
C)Each stockholder acts as an owner of the company
D)Can continue indefinitely

Answer 1

B

Question 2

Generally Accepted Accounting Principles are the procedures and guidelines that must be followed during the accounting process.

Answer 2

True

Question 3

Put the 7 main steps of the accounting process in order (from 1 -7)below:

Answer 3

Question 4

A legal firm would be considered a:

A)merchandise company.
B)manufacturer.
C)service company.
D)None of the above are correct.

Question 5

A sole proprietorship ends with the death of the owner.

Question 6

The Sarbanes-Oxley Act was passed to:

A)prevent fraud at public companies.
B)replace all of the old accounting procedures with new ones.
C)improve the accuracy of the company's financial reporting.
D)Both A and C are correct.

Question 7

Items owned by the business such as land,supplies and equipment are:

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

Question 8

The purpose of the accounting process is to provide financial information about:

A)sole proprietorships.
B)small businesses.
C)large corporations.
D)All of these answers are correct.

Question 9

Accounting provides information to:

A)managers.
B)government.
C)investors.
D)All of these answers are correct.

Question 10

Which is an advantage of a sole proprietorship form of business?

A)There is limited personal risk.
B)The business can continue indefinitely.
C)The owner makes all the decisions.
D)All of these answers are correct.

Question 11

Discuss the advantages and disadvantages of sole proprietorships,partnerships and corporations.

Question 12

The type of business organization that can continue indefinitely is known as a:

A)sole proprietorship.
B)partnership.
C)corporation.
D)None of the above

Question 13

The function of accounting includes analyzing,recording,classifying,summarizing,reporting,and interpreting financial information.

Question 14

Which of the following is not an asset?

A)Cash
B)Accounts Receivable
C)Accounts Payable
D)Buildings

Question 15

Which of the following will be recorded in the owner's equity column as an increase?

A)An exchange of assets
B)The purchase of an asset on credit
C)An investment by the owner
D)A withdrawal by the owner

Question 16

Which of the following is not a type of business organization?

A)Corporation
B)Partnership
C)Sole proprietorship
D)Operation

Question 17

What is the difference between Bookkeeping and Accounting?

Question 18

A corporation:

A)can continue indefinitely.
B)is owned by stockholders.
C)has limited risk to stockholders.
D)all of the above.

Question 19

The purchase of supplies for cash would affect which account category?

A)Assets
B)Liabilities
C)Capital
D)Expense

Question 20

A partnership is a business which is:

A)easy to form.
B)ends with the death of a partner.
C)owned by more than one person.
D)All of these answers are correct.

Question 21

Logan's Motor Sports buys $30,000 of equipment on credit.Which of the following is a true statement?

A)Total assets increase.
B)Total assets are unchanged.
C)Total liabilities decrease.
D)Total liabilities are unchanged.

Question 22

If total liabilities are $1,000 and total assets are $8,000,owner's equity must be:

A)$7,000.
B)$3,000.
C)$10,000.
D)$13,000.

Question 23

The claims of creditors against the assets are:

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

Question 24

If total liabilities increased by $6,000 and the assets increased by $8,000 during the accounting period,what is the change in the owner's equity amount?

A)Increase of $2,000
B)Decrease of $2,000
C)Increase of $10,000
D)Decrease of $10,000

Question 25

If total liabilities are $18,000 and owner's equity is $21,000,the total assets must be:

A)$39,000.
B)$5,000.
C)$20,000.
D)$17,000.

Question 26

The Owner's Equity of Logan's Company is equal to one-quarter of the total assets.Liabilities equal $60,000.What is the amount of Owner's Equity?

A)$40,000
B)$20,000
C)$30,000
D)None of these answers are correct.

Question 27

Katelyn purchased $11,000 of new electronic equipment for her DJ Company on account.The effect on the basic accounting equation was to:

A)decrease Cash $11,000 and increase Equipment $11,000.
B)increase Equipment $11,000 and increase Accounts Payable $11,000.
C)decrease Cash $11,000 and increase Accounts Payable $11,000.
D)increase Cash $11,000 and increase Equipment $11,000.

Question 28

A business paid $5,000 to a creditor in payment of an amount owed.The effect of the transaction on the accounting equation was to:

A)increase one asset,decrease another asset.
B)increase an asset,increase a liability.
C)decrease an asset,decrease a liability.
D)increase an asset,increase owner's equity.

Question 29

Katie's Vegetarian Restaurant,with total assets of $90,000,borrows $15,000 from the bank.Which of the following is a true statement upon borrowing the money?

A)Total assets are now $105,000.
B)Total assets are now $80,000.
C)Total assets are now $15,000.
D)Total assets are now $75,000.

Question 30

Strum Hardware has total assets of $50,000.What are the total assets if new equipment is purchased for $10,000 cash?

A)$45,000
B)$50,000
C)$55,000
D)$60,000

Question 31

How does the purchase of office equipment on account affect the accounting equation?

A)Assets increase; liabilities decrease
B)Assets increase; owner's equity increases
C)Assets increase; liabilities increase
D)Liabilities increase; owner's equity decreases

Question 32

Harvest Moon Company has total assets of $15,000.If $3,000 cash is used to purchase a new computer,the total assets would be:

A)$15,000.
B)$13,000.
C)$17,000.
D)$2,000.

Question 33

The basic accounting equation is:

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

Question 34

Bob purchased a new computer for the company on account.The transaction will:

A)increase Computer; increase Capital.
B)decrease Cash; increase Accounts Payable.
C)decrease Cash; increase Computer.
D)increase Computer; increase Accounts Payable.

Question 35

Bonnie's Baskets purchases $4,000 worth of office equipment on account.This causes:

A)Cash and Capital to decrease.
B)Office Equipment and Accounts Payable to increase.
C)Office Equipment to decrease and Accounts Payable to increase.
D)Accounts Payable to increase and Capital to decrease.

Question 36

An acceptable variation of the accounting equation is:

A)Assets - Liabilities = Owner's Equity.
B)Assets + Owner's Equity = Liabilities.
C)Assets = Liabilities - Owner's Equity.
D)All of these answers are correct.

Question 37

Eileen's Corner Shoppe purchases a new computer for cash.This causes:

A)Cash and Capital to increase.
B)Computer Equipment and Cash to increase.
C)Computer Equipment to increase and Cash to decrease.
D)Accounts Payable to increase and Capital to increase.

Question 38

The balance sheet contains:

A)liabilities,expenses and capital.
B)assets,liabilities and revenues.
C)expenses,assets and cash.
D)assets,liabilities and owner's equity.

Question 39

Mary invested cash in her new business.What effect will this have?

A)Increase an asset and increase a liability
B)Decrease an asset and increase a liability
C)Increase an asset and increase owner's equity
D)Increase an asset and decrease owner's equity

Question 40

Assets are equal to:

A)liabilities + owner's equity.
B)liabilities - owner's equity.
C)liabilities - revenues.
D)revenues - expenses.

Question 41

In a shift of assets,the composition of the assets changes but total assets do not change.

Question 42

A purchase of a vehicle for cash would have what affect on the accounting equation?

A)Total asset amount remains the same.
B)Total liabilities are overstated.
C)Total owner's equity is overstated.
D)Both A and B are correct.

Question 43

Which of the following items is not listed on the balance sheet?

A)Accounts Payable
B)Accounts Receivable
C)Revenue
D)Equipment

Question 44

The purchase of equipment with both cash and on account was recorded as only a credit purchase.Due to this error:

A)assets would be understated.
B)liabilities would be overstated.
C)owner's equity would be overstated.
D)None of the above are correct.

Question 45

To distinguish the total on a financial statement,use double underlines.

Question 46

Which of the following would result if a business purchased Equipment paying a 40% down payment in cash?

A)Equipment would increase and Cash would decrease.
B)Accounts Payable would increase.
C)Since the equipment has not been paid in full,there is nothing to record.
D)Both A and B are correct.

Question 47

The left side of the accounting equation shows what is owned by the business.

Question 48

Which of the following transactions would cause one asset to increase and another asset to decrease?

A)The owner invested cash in the business.
B)The business paid a creditor.
C)The business incurred an expense on credit.
D)The business bought supplies for cash.

Question 49

Creditors' claims against assets are called owner's equity.

Question 50

Which of the following transactions would cause an asset to increase and the owner's equity to increase?

A)The owner invested cash in the business.
B)The business incurred an expense on credit.
C)The business bought supplies on account.
D)The owner withdrew cash from the business.

Question 51

If the liabilities owed by a business total $250,000,then the assets must also total $250,000.

Question 52

If total assets are $30,000 and total liabilities are $18,000,Capital must equal:

A)$12,000.
B)$28,000.
C)$8,000.
D)$20,000.

Question 53

If the assets owned by a business total $100,000,owner's equity must also total $100,000.

Question 54

Which of the following would result if the owner invested cash in the business?

A)Cash would increase and Capital would decrease.
B)Cash would increase and Capital would increase.
C)Cash would decrease and Capital would increase.
D)An investment by the owner is not a business transaction.

Question 55

The cash purchase of a truck was recorded as a purchase on credit.Due to this error:

A)assets were overstated.
B)liabilities were overstated.
C)answers A and B are both correct.
D)None of the above are correct.

Question 56

If the assets owned by a business total $60,000 and liabilities total $30,000,then owner's equity totals $90,000.

Question 57

The left side of the accounting equation must always equal the right side of the equation.

Question 58

Cash is the same thing as Capital.

Question 59

Which of the following would result if the business purchased supplies on credit?

A)Supplies would increase and Cash would decrease.
B)Supplies would increase and Capital would increase.
C)Supplies would increase and Accounts Payable would increase.
D)The purchase of supplies is not a business transaction.

Question 60

The balance sheet shows the company's financial position as of a particular date.

Question 61

The payment of accounts payable would:

A)increase both assets and liabilities.
B)increase assets and decrease liabilities.
C)decrease both assets and liabilities.
D)decrease assets and increase liabilities.

Question 62

Which of the following transactions has no effect on owner's equity?

A)Paying salaries expense
B)Equipment purchase
C)Billing for services rendered
D)A withdrawal

Question 63

Record the following transactions in the basic accounting equation:
a.Brian invests $10,000 cash to begin an accounting service.
b.The company buys office furniture for cash,$600.
c.The company buys additional office furniture on account,$300.
d.The company makes a payment on the office furniture,$200.
a.
b.
c.
d.
Totals

Question 64

Ryan withdrew cash from the business to pay his personal cell phone bill.The expanded accounting equation changes include:

A)increase in both Cash and Withdrawal.
B)decrease in both Cash and Withdrawal.
C)decrease in Cash and increase in Withdrawal.
D)increase in Cash and decrease in Withdrawal.

Question 65

If liabilities are $10,000 and assets are $20,000,owner's equity will be $10,000.

Question 66

When services are rendered but payment is not made,which account would be increased?

A)Accounts Receivable
B)Accounts Payable
C)Cash
D)Withdrawal

Question 67

If a company's revenues are higher than its expenses,it will cause:

A)an increase in owner's equity.
B)a decrease in owner's equity.
C)an increase in assets.
D)no effect on owner's equity.

Question 68

If beginning capital was $110,000,ending capital is $95,000,and the owner's withdrawals were $10,000,the amount of net income or net loss was:

A)net income of $5,000.
B)net income of $15,000.
C)net loss of $15,000.
D)net loss of $5,000.

Question 69

If 'Ol Fashioned Toys' revenues are greater than its expenses during the accounting period:

A)assets will increase more than liabilities.
B)liabilities will increase more than assets.
C)the business will incur a loss.
D)the business will earn a net income.

Question 70

Revenue,expenses,and withdrawals are subdivisions of:

A)assets.
B)liabilities.
C)owner's equity.
D)All of these answers are correct.

Question 71

The net income or net loss is calculated on the:

A)balance sheet.
B)statement of owner's equity.
C)income statement.
D)none of these.

Question 72

The three elements that make up a balance sheet are assets,liabilities and expenses.

Question 73

Go Blue Retail Store collected $12,000 of its accounts receivable.The expanded accounting equation changes include:

A)Cash and Capital increase,$12,000.
B)Cash and Revenue increase $12,000.
C)Cash increases and Accounts Receivable decreases $12,000.
D)Accounts Receivable decreases and Capital increases $12,000.

Question 74

The accounting equation states that total assets must always equal total liabilities plus owner's equity.

Question 75

If 'Ol Fashioned Toys' revenues are less than its expenses during the accounting period:

A)owner's withdrawals decrease net income.
B)net income causes liabilities to decrease.
C)the business will incur a loss.
D)owner's withdrawals increase owner's equity.

Question 76

Crystal Clear Imagery received and paid a utility bill for $500 for the month of November.This transaction will:

A)increase Cash and increase Utility Expense.
B)decrease Cash and increase Utility Expense.
C)increase Cash and decrease Utility Expense.
D)increase Utility Expense and decrease Withdrawal.

Question 77

Boxes R' Us paid $3,000 in salaries and wages for February.This transaction will:

A)increase expenses and decrease revenue.
B)increase expenses and increase liabilities.
C)decrease assets and increase expenses.
D)decrease assets and expenses.

Question 78

Owner's withdrawals:

A)decrease assets.
B)increase expenses.
C)increase liabilities.
D)decrease withdrawals.

Question 79

Carrie billed her legal clients $6,000 for legal work completed during the month.This transaction will:

A)cause a $6,000 increase in revenues and liabilities.
B)cause a $6,000 increase in revenues and a decrease in liabilities.
C)cause a $6,000 increase in assets and revenues.
D)not be recorded until the cash is collected.

Question 80

Tracey's Photography completes the following transactions:
a.Tracey invests $10,000 cash in her company.
b.The company purchases equipment on account,$500.
c.The company purchases additional equipment for cash,$200.
d.The company makes a payment on account for the equipment,$300.
Required: Record the above transactions in the basic accounting equation.
a.=
b.=
c.=
d.=