1. Which financial statement reports financial data based on the matching concept?
A. Income statement.
B. Statement of owner's equity.
C. Balance sheet.
D. Statement of cash flows.
2. Each of the following transactions affects owner's equity except
A. A withdrawal of cash by owner.
B. A sale on account.
C. An investment by owner.
D. The purchase of land with cash.
3. The statement that reports net income or loss for a certain period in time is the
A. Statement of owner's equity.
B. Statement of cash flows.
C. Balance sheet.
D. Income statement.
4. All of the following are incorrect as to the rights of creditors regarding a business's assets except:
A. The rights of creditors come before the rights of stockholders.
B. The rights of creditors and the rights of the owners are equal.
C. The rights of creditors come after the rights of owners.
D. The rights of the stockholders precede the rights of the creditors.
5. A(n) _________________ changes basic inputs into products that are sold to customers.
A. Manufacturing business.
B. Enterprise business.
C. Merchandising business.
D. Service business.
6. Clayton Company purchased a new coffee maker in the amount of $3,500. Clayton paid $1,000 down and will pay the
remainder in 60 days. What effect does this transaction have on the accounting equation?
A. $2,500 net increase in assets and $2,500 increase in liabilities.
B. $3,500 net increase in assets and $3,500 increase in liabilities.
C. $3,500 net increase in assets and $2,500 increase in liabilities.
D. $1,000 net decrease in assets and $1,000 decrease in liabilities.
Accounting Equation 3,500 – 1,000 = 2,500
7. Which of the following forms of business entities generates 90% of business revenues in the U.S.?
A. Partnerships.
B. Corporations.
C. Proprietorships.
D. Manufacturing companies.
8. Ramos Inc. has total assets of $1,000 and total liabilities of $450 on December 31, 2013. Assume that assets
increased by $130 and liabilities decreased by $25 during 2014. What would owner's equity be as of December 31,
2014?
A. $550.
B. $705.
C. $1,295.
D. $655.
A. Income statement.
B. Statement of owner's equity.
C. Balance sheet.
D. Statement of cash flows.
2. Each of the following transactions affects owner's equity except
A. A withdrawal of cash by owner.
B. A sale on account.
C. An investment by owner.
D. The purchase of land with cash.
3. The statement that reports net income or loss for a certain period in time is the
A. Statement of owner's equity.
B. Statement of cash flows.
C. Balance sheet.
D. Income statement.
4. All of the following are incorrect as to the rights of creditors regarding a business's assets except:
A. The rights of creditors come before the rights of stockholders.
B. The rights of creditors and the rights of the owners are equal.
C. The rights of creditors come after the rights of owners.
D. The rights of the stockholders precede the rights of the creditors.
5. A(n) _________________ changes basic inputs into products that are sold to customers.
A. Manufacturing business.
B. Enterprise business.
C. Merchandising business.
D. Service business.
6. Clayton Company purchased a new coffee maker in the amount of $3,500. Clayton paid $1,000 down and will pay the
remainder in 60 days. What effect does this transaction have on the accounting equation?
A. $2,500 net increase in assets and $2,500 increase in liabilities.
B. $3,500 net increase in assets and $3,500 increase in liabilities.
C. $3,500 net increase in assets and $2,500 increase in liabilities.
D. $1,000 net decrease in assets and $1,000 decrease in liabilities.
Accounting Equation 3,500 – 1,000 = 2,500
7. Which of the following forms of business entities generates 90% of business revenues in the U.S.?
A. Partnerships.
B. Corporations.
C. Proprietorships.
D. Manufacturing companies.
8. Ramos Inc. has total assets of $1,000 and total liabilities of $450 on December 31, 2013. Assume that assets
increased by $130 and liabilities decreased by $25 during 2014. What would owner's equity be as of December 31,
2014?
A. $550.
B. $705.
C. $1,295.
D. $655.
