1. The costs of doing business through the sale of goods and services are called.
A. net income
b. expenses.
c. revenues
d. dividends
2. Which of the following best describes the term "retained earnings"
a. The amount of total profits earned by a business since it began operations
b. the amount of interest or claim that the owners have on the assets of the business
c. the future economic resources of a business entity
d. the cumulative profits earned by the business less any dividends distributed
3. Which financial statement reports information helpful in assessing working capital?
A. income statement
b. balance sheet
c. statement of retained earnings
d. statement of cash flows
4. which of the following is a noncurrent asset?
A. inventories
b. office supplies
c. land
d. accounts receivable
5. Under current accounting principles, how is net income on the income statement measured?
a. net change in owners equity during the period
b. excess of revenues over expenses during the period
c. net change in the cash balance during the period
d. excess of revenues over expenses less any dividends paid during the period.
6. The purchase of office equipment of credit has what effect on the accounting equation?
a. assets decrease and stockholders equity decreases
b. liabilities increases and stockholders equity decreases
c. assets increase and liabilities increase
d. assets decrease and liabilities decrease
7. Services are provided for customers are sent bills for the amount they owe. For this transaction, identify the effect on the accounting equation.
a. assets increase and liabilities increase
b. assets increase and stockholders equity increase
c. liabilities increase and stockholders equity decreases
d. liabilities decrease and aseets decrease
8. A bill is received for electric service; the charge for the electricity is recorded, but payment will be made later. For this transaction, identify the effect on the accounting equation.
a. assets increase and liabilities increase
b. assets increase and stockholders equity increases
c. liabilities increase and stockholders equity decreases
d. liabilities decrease and assets decrease
9. Which of the following statements best describes one effect of recognizing expenses incurred by a business entity?
a. assets will increase
b. liabilities will decrease
c. stockholders equity will increase
d. stockholders equity will decrease
10. Which of the following statements best describes the effects of recognizing revenue earned by a business entity?
a. assets increase only when cash sales are made
b. stockholders equity increases only when credit sales are made.
c. assets and stockholders equity increase when either cash or credit sales are made
d. assets increase but stockholders equity decreases, when either cash or credit sales are made