Deck 1: Accounting Concepts and Procedures

Question 1

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

A) corporation.
B) partnership.
C) sole proprietorship.
D) All of the above

Answer 1

C

Question 2

Which of the following will decrease Owner's Equity?

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

Answer 2

D

Question 3

The function of accounting includes analyzing, recording, classifying, summarizing, reporting, strategic management and environmental assessment.

Answer 3

False

Question 4

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

Question 5

Put the 7 main steps of the accounting process in order (from 1 -7) below:
________ Interpreting
________ Analyzing
________ Recording
________ Classifying
________ Reporting
________ Communication
________ Summarizing

Question 6

What is the difference between Bookkeeping and Accounting?

Question 7

Accounting provides information to:

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

Question 8

A sole proprietorship ends with the death of the owner.

Question 9

A partnership is a business which:

A) is easy to form.
B) ends with the death of a partner.
C) is owned by more than one person.
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) The business is legally separate from the owner.

Question 11

Which of the following is NOT an Asset?

A) Cash
B) Accounts Receivable
C) Buildings
D) All of the above are Assets.

Question 12

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 13

The Sarbanes-Oxley Act was passed to:

A) prevent financial statement fraud at public companies.
B) replace inventory accounting procedures.
C) improve the accuracy of the company's financial reporting.
D) Both A and C are correct.

Question 14

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

Question 15

A corporation:

A) is legally separate from its owners.
B) is owned by stockholders.
C) has limited risk to stockholders.
D) All of the above

Question 16

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

A) Assets.
B) Liabilities.
C) Owner's Equity.
D) Expenses.

Question 17

A law firm would be considered a:

A) merchandise company.
B) manufacturer.
C) service company.
D) retailer.

Question 18

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

A) Corporation
B) Partnership
C) Sole proprietorship
D) An Accounting organization

Question 19

Generally Accepted Accounting Principles are the procedures and guidelines that must be followed every other year.

Question 20

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

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

Question 21

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

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

Question 22

Bonnie's Baskets purchases $3,000 worth of office equipment on open 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 23

If total liabilities increased by $10,000 and the assets increased by $10,000 during the accounting period, what is the change in the owner's equity amount?

A) No effect on owner's equity
B) Decrease of $10,000
C) Increase of $20,000
D) Decrease of $40,000

Question 24

The claims of creditors against the Assets are:

A) Expenses.
B) Revenues.
C) Liabilities.
D) Owner's Equity.

Question 25

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) Decrease an Asset and decrease Owner's Equity

Question 26

An acceptable variation of the accounting equation is:

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

Question 27

Logan's Motor Sports buys $47,000 of supplies for cash. Which of the following is a true statement?

A) Total Assets increase.
B) Total Assets are unchanged.
C) Total Assets decrease.
D) Total Liabilities are unchanged.

Question 28

Pat purchased $8,000 of new electronic equipment for her BJ Company on open account. The effect on the basic accounting equation was to:

A) increase Cash $8,000 and increase Equipment $8,000.
B) increase Equipment $8,000 and increase Accounts Payable $8,000.
C) decrease Cash $8,000 and increase Accounts Payable $8,000.
D) decrease Cash $8,000 and increase Equipment $8,000.

Question 29

A business received $10,000 from a customer 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 30

How does the purchase of supplies 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 31

The Owner's Equity of Logan's Company is equal to one-half of the total Assets. Liabilities equal $90,000. What is the amount of Owner's Equity?

A) $45,000
B) $90,000
C) $135,000
D) None of these answers is correct.

Question 32

The basic accounting equation is:

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

Question 33

The balance sheet contains:

A) Liabilities, Expenses and capital.
B) Assets, Liabilities and Revenues.
C) Expenses, Assets and cash.
D) None of the above is correct.

Question 34

Strum Hardware has total Assets of $60,000. What are the total Assets if new building is purchased for $5,000 cash?

A) $70,000
B) $65,000
C) $55,000
D) $60,000

Question 35

If total Liabilities are $50,000 and Owner's Equity is $35,000, the total Assets must be:

A) $85,000.
B) $15,000.
C) $42,500.
D) $70,000.

Question 36

If total Liabilities are $2,000 and total Assets are $16,000, Owner's Equity must be:

A) $14,000.
B) $9,000.
C) $16,000.
D) $18,000.

Question 37

Harvest Moon Company has total Assets of $37,000. If $2,000 cash is used to purchase a new computer, the total Assets would be:

A) $37,000.
B) $35,000.
C) $39,000.
D) $2,000.

Question 38

Assets are equal to:

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

Question 39

Katie's Vegetarian Restaurant, with total Assets of $121,000, borrows $27,000 from the bank. Which of the following is a true statement upon borrowing the money?

A) Total Assets are now $148,000.
B) Total Assets are now $94,000.
C) Total Assets are now $175,000.
D) Total Assets are now $121,000.

Question 40

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

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

Question 41

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

Question 42

The left side of the accounting equation must always be greater than the right side of the equation.

Question 43

If Total Assets are $68,000 and Total Capital is $30,000, Liabilities must equal:

A) $38,000.
B) $30,000.
C) $98,000.
D) $68,000.

Question 44

Which of the following would result if a business purchased Equipment with a 40% down payment and the rest on open account?

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 45

To distinguish the total on a financial statement, use single underline.

Question 46

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

A) Assets were understated.
B) Liabilities were understated.
C) Answers A and B are both correct.
D) None of the above is correct.

Question 47

Creditors' claims against Assets are called Liabilities.

Question 48

A purchase of a vehicle on credit would have what effect on the accounting equation?

A) Total Assets and total Liabilities increase.
B) Total Liabilities are overstated.
C) Total Owner's Equity is overstated.
D) Both A and B are correct.

Question 49

Which of the following would result if the owner withdrew cash from the business?

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

Question 50

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

Question 51

If the Assets owned by a business total $59,000, Owner's Equity must also total $59,000.

Question 52

Revenue is the same thing as cash.

Question 53

The right side of the accounting equation shows what is owed by the business.

Question 54

If Owner's Equity totals $73,000 and Liabilities total $40,000, then Assets owned by a business totals $113,000.

Question 55

If the Liabilities owed by a business total $150,000, then the Assets must also total $150,000.

Question 56

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

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

Question 57

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 58

Which of the following would result if the business purchased equipment for cash?

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

Question 59

The purchase of supplies with both cash and on account was recorded as only an open account 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 is correct.

Question 60

Which of the following transactions would cause an asset to decrease and the Owner's Equity to decrease?

A) The owner invested cash in the business.
B) The business incurred an Expense on credit.
C) The business bought supplies on account.
D) None of the above.

Question 61

If beginning capital was $170,000, ending capital is $93,000, and the owner's withdrawals were $19,000, the amount of net income or net loss was:

A) net income of $77,000.
B) net income of $58,000.
C) net loss of $58,000.
D) net loss of $77,000.

Question 62

The three elements that make up a balance sheet are Assets, Liabilities and Owner's Equity.

Question 63

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) net loss.

Question 64

Crystal Clear Imagery received and paid a utility bill for $600 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 Revenue.

Question 65

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

A) Accounts Receivable
B) Accounts Payable
C) Cash
D) Supplies Expense

Question 66

Mike's Photography completes the following transactions:
a. Mike invests $15,000 cash in her company.
b. The company purchases equipment on account, $600.
c. The company purchases additional equipment for cash, $300.
d. The company makes a payment on account for the equipment, $500.
Required: Record the above transactions in the basic accounting equation.

Question 67

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 Withdrawals.
B) decrease in both Cash and Withdrawals.
C) decrease in Cash and increase in Withdrawals.
D) increase in Cash and decrease in Withdrawals.

Question 68

Revenue, Expenses, and withdrawals are subdivisions of:

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

Question 69

Go Big Red Retail Store collected $16,000 of its accounts receivable. The expanded accounting equation changes include:

A) Cash and Capital increase $16,000.
B) Cash and Revenue increase $16,000.
C) Cash increases and Accounts Receivable decreases $16,000.
D) Accounts Receivable decreases and Capital increases $16,000.

Question 70

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 71

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 72

Which of the following transactions affect Owner's Equity?

A) Payment on account
B) Equipment purchase
C) Customer payment
D) A withdrawal

Question 73

Kim billed her legal clients $12,000 for legal work completed during the month. This transaction will:

A) cause a $12,000 increase in Revenues and Liabilities.
B) cause a $12,000 increase in Revenues and a decrease in cash.
C) cause a $12,000 increase in Assets and Revenues.
D) not be recorded until the cash is collected.

Question 74

If Liabilities are $22,000 and Assets are $42,000, Owner's Equity will be $20,000.

Question 75

The accounting equation states that total Assets must always equal total Liabilities plus Owner's Equity.

Question 76

Record the following transactions in the basic accounting equation:
a. Brian invests $30,000 cash to begin an accounting service.
b. The company buys office furniture for cash, $900.
c. The company buys additional office furniture on account, $200.
d. The company makes a payment on the office furniture, $100.

Question 77

If Ol' Fashioned Toys' Revenues are less than its Expenses during the accounting period:

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

Question 78

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 79

Owner's withdrawals:

A) decrease Assets.
B) increase Expenses.
C) increase Assets.
D) decrease Withdrawals.

Question 80

Cup's Inc. paid $15,000 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) increase Assets and Expenses.