Question 1

Liabilities represent the ownership claim on total assets.

Accepted Answer

A) True 
 B)False  False

Question 2

The basic objective of financial reporting is to provide useful information to investors and creditors to make decisions

Accepted Answer

A) True 
 B)False  True

Question 3

How is profit calculated?

Accepted Answer

Revenues - Expenses = Profit

Question 4

According to the monetary unit assumption, inflation is ignored in accounting and only transactions that can be expressed as an amount of money are recorded.

Accepted Answer

A) True 
 B)False

Question 5

Bob Manor is the proprietor of Manor Accounting. For each of the following transactions, indicate the effects on the company's assets, liabilities, and owner's equity. Indicate the dollar amount and whether it is an increase (+) or a decrease (-).

Accepted Answer

The answer of Bob Manor is the proprietor of Manor...

Question 6

The going concern assumption assumes that a company will liquidate in the near future

Accepted Answer

A) True 
 B)False

Question 7

An expense paid with cash would result in an equal decrease in liabilities and owner's equity

Accepted Answer

A) True 
 B)False

Question 8

A company has a profit when:

Accepted Answer

A)  assets exceed liabilities for the period. 
B)  investments exceed drawings for the period. 
C)  revenues exceed expenses for the period. 
D)  revenues exceed liabilities for the period.

Question 9

In a proprietorship, owner's equity increases when:

Accepted Answer

A)  the owner withdraws money for personal use. 
B)  money is borrowed from the bank. 
C)  cash is collected from a customer who had previously been billed for services. 
D)  a service is provided to a customer on account.

Question 10

A payment of accounts payable would:

Accepted Answer

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

Question 11

According to the cost principle, assets should be reported at their replacement cost, not their original cost.

Accepted Answer

A) True 
 B)False

Question 12

Define and give an example of each of the following terms. Assume that you are the proprietor of a house painting business.
a) Assets
b) Liabilities
c) Expenses

Accepted Answer

The answer of Define and give an example of each...

Question 13

What are the four basic financial statements?

Accepted Answer

The answer of What are the four basic financial statements?...

Question 14

Owner's Equity is not:

Accepted Answer

A)  existing debts and obligations of the company. 
B)  the owner's claim on total assets. 
C)  assets minus total liabilities. 
D)  often called residual equity.

Question 15

State the basic accounting equation

Accepted Answer

The answer of State the basic accounting equation...

Question 16

Private companies have a choice of whether to follow ASPE or IFRS.

Accepted Answer

A) True 
 B)False

Question 17

The financial statement that reports the assets, liabilities, and owner's equity at a specific date is the:

Accepted Answer

A)  income statement. 
B)  statement of owner's equity. 
C)  balance sheet. 
D)  cash flow statement.

Exam 1: Accounting in Action

Liabilities represent the ownership claim on total assets.

The basic objective of financial reporting is to provide useful information to investors and creditors to make decisions

How is profit calculated?

According to the monetary unit assumption, inflation is ignored in accounting and only transactions that can be expressed as an amount of money are recorded.

Bob Manor is the proprietor of Manor Accounting. For each of the following transactions, indicate the effects on the company's assets, liabilities, and owner's equity. Indicate the dollar amount and whether it is an increase (+) or a decrease (-).

The going concern assumption assumes that a company will liquidate in the near future

An expense paid with cash would result in an equal decrease in liabilities and owner's equity

A company has a profit when:

In a proprietorship, owner's equity increases when:

A payment of accounts payable would:

According to the cost principle, assets should be reported at their replacement cost, not their original cost.

Define and give an example of each of the following terms. Assume that you are the proprietor of a house painting business. a) Assets b) Liabilities c) Expenses

What are the four basic financial statements?

Owner's Equity is not:

State the basic accounting equation

Private companies have a choice of whether to follow ASPE or IFRS.

The financial statement that reports the assets, liabilities, and owner's equity at a specific date is the: