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

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

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

Answer 2

C

Question 3

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

Answer 3

C

Question 4

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 5

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 6

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 7

Amounts owed by a business are referred to as

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

Question 8

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 9

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 10

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.

Question 11

When an owner deposits cash in an account in the name of the business, it is an increase to

A)Cash and Accounts Receivable.
B)Cash and Drawing.
C)Cash and Capital.
D)Cash and Accounts Payable.
E)Cash and Rent Expense.

Question 12

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 13

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 14

S. Storm has $20,000 invested in his business and the business owes creditors $8,000. Determine the amount of assets in the business.

A)$28,000
B)$12,000
C)$14,000
D)None of the answers listed

Question 15

Which of the following is not considered an account?

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

Question 16

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 17

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 18

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 19

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 20

If an owner invests her computer and printer in the business, there is an increase to

A)Cash and Capital.
B)Computer Equipment and Drawing.
C)Cash and Drawing.
D)Computer Equipment and Capital.
E)Computer Equipment and Cash.

Question 21

A one-owner business is called a

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

Question 22

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 23

Prepaid Insurance is a(n)

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

Question 24

Accounts Payable is a(n)

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

Question 25

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 26

Accounts Receivable is a(n)

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

Question 27

An example of a liability is

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

Question 28

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 29

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 30

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 31

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 32

An example of an asset is

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

Question 33

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 34

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 35

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 36

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 37

The account, ___________, represents amounts earned by a business.

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

Question 38

When a company pays salaries to an assistant,

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

Question 39

Professional Fees is a(n)

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

Question 40

The borrowing of money will

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

Question 41

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 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 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 44

R. Ronald withdrew $50,000 from the business. This transaction should be recorded as a(n)

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

Question 45

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 46

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

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

Question 47

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 48

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 49

Lima Company received a bill for an expense, $620. Lima Company will record a(n)

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

Question 50

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

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

Question 51

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 52

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

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

Question 53

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 54

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 assets?

A)$10,250
B)$2,350
C)$10,530
D)$16,530

Question 55

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 56

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 57

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 58

Wages Expense is a(n)

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

Question 59

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 60

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 61

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

Question 62

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

Question 63

Business transactions are expressed in terms of money.

Question 64

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

Question 65

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

Question 66

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

Question 67

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

Question 68

Accounts Receivable is considered an asset.

Question 69

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

Question 70

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

Question 71

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

Question 72

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

Question 73

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

Question 74

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

Question 75

Assets are things of value owned by a business entity.

Question 76

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

Question 77

Liabilities represent amounts owed to creditors.

Question 78

Match the terms below with the correct definitions.

Costs that relate to the earning of revenue

Question 79

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

Question 80

Match the terms below with the correct definitions.

Assets minus liabilities