Assignemnt
Part 1
1. 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 answers are correct.
2. 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.
3. Accounting provides information to:
a. managers.
b. government.
c. investors.
d. All of these answers are correct.
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
5. A partnership is .a business that:
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.
6. 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.
7. 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
8. The claims of creditors against the assets are: expenses.
b. revenues.
c. liabilities.
d. owner's equity.
9. Assets are equal to:
a. liabilities + owner's equity.
b. liabilities - owner's equity.
c. liabilities ' revenues.
d. revenues ' expenses.
10. 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.
11. 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.
12. 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
13. 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
14. 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
15. 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.
16. Logan's Motor Sports buys $30,000 of equipment on credit. Which of the I following is a true statement?
a. Total assets increase.
b. 1 Total assets are unchanged.
c. Total liabilities decrease.
d. Total liabilities are unchanged.
17. 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.
18. Bob purchased a new computer for the company on account. The transaction will:
a. increase Computer and increase Capital.
b. decrease Cash and increase Accounts Payable.
c. decrease Cash andincrease Computer.
d. increase Computer and increase Accounts Payable.
19. 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.
20. 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.
Part 2
1. 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 the above answers are correct.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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
7. When services are rendered but payment is not made, which account would be increased?
a. Accounts receivable
b. Accounts payable
c. Cash
d. Withdrawal
8. If '01 Fashioned Toys' revenues are less than its expenses during the accounting period, then:
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.
9. 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.
10. 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.
11. Expenses:
a. are costs the company incurs in carrying on operations.
b. are a subdivision of owner's equity.
c. record personal expenses not related to the business.
d. Both A and B are correct.
12. An expense should be recorded when:
a. the bill is paid.
b. the expense is incurred.
c. a bill is received in the mail.
d. None of the above answers are correct.
13. A revenue should be recorded when:
a. it is earned.
b. payment is received.
c. the invoice is sent to the customer.
d. None of the above answers are correct
14. Which accounts are affected when the company buys supplies on account?
a. Assets and capital
b. Liabilities and capital
c. Assets and liabilities
d. None of the above answers are correct.
15. Vic's Mart collects $700 of its accounts receivable. The expanded accounting equation impact is:
a. cash and capital increase $700.
b. cash and revenue increase $700.
c. cash increases and accounts receivable decreases $700.
d. accounts receivable decreases and capital increases $700.
16. The increase or decrease in the owner's equity is reported on the:
a. income statement.
b. statement of owner's equity.
c. balance sheet.
d. All of these answers are correct.
17. Which financial statement is prepared first?
a. Statement of Owner's Equity
b. Balance Sheet
c. Income Statement
d. None of the above
18. The financial statement that shows business results in terms of revenue and expenses is:
a. an income statement.
b. a balance sheet.
c. a statement of owner's equity.
d. the statement of cash flows.
19. An accounting report that shows the changes in capital during the accounting period is:
a. a balance sheet.
b. an income statement
c. a statement of owner's equity.
d. All of these answers are correct.
20. Which of the following items are on both the balance sheet and the statement of owner's equity?
a. Net loss
b. Capital
c. Additional owner's investments
d. Owner's withdrawals
Part 3
1. Jim Walton performed services on credit for $2,450. A debit for this transaction should be recorded to:
a. revenue.
b. accounts receivable.
c. accounts payable.
d. cash.
2. When an owner records a credit for $650 for revenue earned but not yet received, the amount of the debit should be:
a. $325.
b. $0.
c. $975.
d. $650.
3. The left side of any account is the:
a. debit side.
b. credit side.
c. ending balance.
d. footings.
4. The right side of any account is the:
a. debit side.
b. credit side.
c. ending balance.
d. footings
5. The accounts payable account is:
a. a revenue, and it has a normal debit balance
b. an expense, and it has a normal credit balance
c. a liability, and it has a normal debit balance
d. a liability, and it has a normal credit balance
6. An account that would be increased by a credit is:
a. cash.
b. accounts receivable.
c. utilities expense.
d. accounts payable.
7. An account is said to have a debit balance if:
a. the footing of the debits exceeds the footing of the credits.
b. there are more entries on the debit side than on the credit side.
c. its normal balance is debit without regard to the amounts or number of entries on the debit side.
d. the last entry of the accounting period was posted on the debit side.
8. Which of the following types of accounts has a normal credit balance?
a. Withdrawals
b. Assets
c. Expenses
d. Revenues
9. When recording transactions in two or more accounts and the totals of the debits and credits are equal, it is called:
a. debiting.
b. crediting.
c. posting.
d. double-entry bookkeeping.
10. The ledger is
a. a group of accounts that records data from business transactions.
b. a tool used to make sure that all accounts have normal balances.
c. a chronological record of the day's transactions.
d. a tool used to ensure that debits equal credits.
11. Which of the statements of the rules of debit and credit is true?
a. Decrease accounts receivable with a credit and the normal balance is a credit.
b. Increase accounts payable with a credit and the normal balance is a credit.
c. Increase capital with a debit and the normal balance is a debit.
d. Decrease cash with a debit and the normal balance is a debit.
12. Which of the following entries records the investment of cash by John, owner of a sole proprietorship?
a. Debit John, Capital; credit Cash
b. Debit Cash; credit John, Withdrawals
c. Debit John, Withdrawals; credit Cash
d. Debit Cash; credit John, Capital
13. The owner of BobCats R Us paid his personal MasterCard bill using a company check. The correct entry to record the transaction is:
a. credit Cash; debit Capital.
b. credit Cash; debit Supplies Expense.
c. credit Cash; debit Withdrawals.
d. credit Cash; debit Accounts Receivable.
14. The Accounts Receivable account has total debit postings of $1,900 and credit postings of $1100. The balance of the account is:
a. $800 debit.
b. $800 credit.
c. $2,600 credit.
d. $2,600 debit.
15. Office Supplies had a normal starting balance of $75. There were debit postings of $80 and credit postings of $60 during the month. The ending balance is:
a. $55 debit.
b. $55 credit.
c. $95 debit.
d. $95 credit..
16. The beginning balance in Cash was $3,500. Additional cash of $2,000 was received. Checks were written totaling $2,500. The cash balance is:
a. $2,000.
b. $6,000.
c. $4,500.
d. $3,000.
17. The owner invested personal equipment in the business. To record this transaction:
a. debit Equipment and credit Accounts Payable.
b. debit Accounts Payable and credit Equipment.
c. debit Equipment and credit Capital.
d. credit Equipment and debit Capital.
18. The business bought supplies on account. To record this:
a. an expense is debited and a liability is credited.
b. an asset is debited and an asset is credited.
c. an asset is debited and a liability is credited.
d. None of the above answers are correct.
19. A liability would be credited and an expense debited if:
a. the business paid a creditor.
b. the business incurred an expense and did not pay the expense immediately.
c. the business bought supplies on account.
d. the business bought supplies for cash.
20. An asset would be debited and a liability credited if:
a. the business bought supplies for cash.
b. the business incurred an expense and paid it.
c. the business incurred an expense and did not pay for the expense immediately.
d. the business bought equipment on account.