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Chapter Quiz
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1
When expenses exceed revenues, a company suffers a net loss.
A)True
B)False
2
Capital represents the owner's investment, or equity, in a business.
A)True
B)False
3
In the fundamental accounting equation, assets are added to liabilities.
A)True
B)False
4
Business transactions are expressed in terms of money.
A)True
B)False
5
A business transaction always involves an exchange of money (in terms of accounting).
A)True
B)False
6
Equipment is a revenue item listed on the Equity side of the Accounting Equation.
A)True
B)False
7
The liability created when supplies are bought on account is called an account payable.
A)True
B)False
8
Every transaction is recorded in terms of increases and/or decreases in two or more accounts.
A)True
B)False
9
Assets are things of value owned by a business entity.
A)True
B)False
10
Liabilities represent amounts owed to creditors.
A)True
B)False
11
The accounting equation does not always have to remain in balance.
A)True
B)False
12
The Cash account is a liability.
A)True
B)False
13
If withdrawals increase then total equity decreases.
A)True
B)False
14
The Balance Sheet reports the type and amounts of assets, liabilities, and owner's equity at a point in time.
A)True
B)False
15
The Income Statement reports the changes in equity over a period of time.
A)True
B)False
16
Which of the following transactions does not include an increase to revenue?
A)Sold services on account
B)Received cash for services performed
C)Collected on an account receivable
D)All of these should be recorded as revenue
E)None of these should be recorded as revenue
17
Which of the following is not considered an account?
A)Supplies
B)Assets
C)Cash
D)Equipment
E)Accounts Payable
18
The purchase of an asset on account will
A)increase total assets and increase owner's equity
B)increase total assets and decrease total liabilities
C)increase total assets and increase total liabilities
D)have no effect on total assets or total liabilities
E)do none of these
19
The owner of a business invested $6,000 in the business. What are the effects on the fundamental accounting equation?
A)assets increase $6000; liabilities increased $6,000; owner's equity, no effect
B)assets increase $6,000; liabilities, no effect; owner's equity increases $6,000
C)assets increase $6,000; liabilities, no effect; owner's equity decreases $6,000
D)assets increase $6,000; liabilities decrease $6,000; owner's equity increases $6,000
E)none of these
20
The purchase of an asset for cash will
A)increase total assets and increase total owner's equity.
B)have no effect on total assets or total liabilities.
C)increase total assets and increase total liabilities.
D)increase total assets and decrease total liabilities.
E)none of these.
21
Amounts owed by a business to creditors are referred to as
A)assets.
B)equities.
C)liabilities.
D)capital.
E)none of these.
22
Which of the following equations is the fundamental accounting equation?
A)Assets – Owner's Equity = Liabilities
B)Assets = Liabilities + Owner's Equity
C)Assets – Liabilities = Owner's Equity
D)Assets + Liabilities = Owner's Equity
E)none of these
23
Revenue may be in the form of
A)cash.
B)checks
C)credit card receipts.
D)credit sales to charge customers.
E)all of these.
24
Over a period of time, if total assets increase by $26,000 and total liabilities increase by $6,000, then owner's equity will be increased by
A)$7,000.
B)$20,000.
C)$32,000.
D)$25,000.
E)none of these.
25
A business received $900 cash from charge customers to apply on account. The effect of the transaction is
A)an increase in an asset and a decrease in a liability.
B)an increase in an asset and a decrease in an asset.
C)an increase in an asset and an increase in revenue.
D)an increase in an asset and a decrease in capital.
E)none of these.
26
A business pays $900 cash on account. The effect of the transaction is
A)an increase in an asset and a decrease in a liability.
B)a decrease in an asset and a decrease in a liability.
C)an increase in an asset and an increase in revenue.
D)an increase in an asset and a decrease in capital.
E)none of these.
27
An owner withdraws $100 cash. The effect of the transaction is
A)an increase in an asset and a decrease in a liability.
B)a decrease in an asset and a decrease in a liability.
C)an increase in an asset and an increase in revenue.
D)a decrease in an asset and a decrease in total equity
E)none of these.
28
The income statement shows:
A)the profitability of business operations over a period of time.
B)how equity changes over the reporting period
C)the type and amounts of assets, liabilities, and equity at a point in time.
D)all of the above
E)none of these.
29
The Balance Sheet shows:
A)the profitability of business operations over a period of time.
B)how equity changes over the reporting period
C)the type and amounts of assets, liabilities, and equity at a point in time.
D)all of the above
E)none of these.
30
All of the following accounts would appear on a Balance sheet EXCEPT:
A)Consulting Revenue
B)Cash
C)Furniture.
D)Accounts Payable
E)Owner's Capital





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