,Exam CHAPTER 1
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The heading of a balance sheet (in correct order) would include 1)
A) who, what, when B) who, what, why
C) who, where, when. D) why, what, where
2) The financial statement that shows revenue and expenses for a period of time is the 2)
A) income statement. B) statement of owner's equity.
C) balance sheet. D) statement of cash flows.
3) Which of the following would have claims against the assets of the business? 3)
A) Cash and Equipment B) Cash and liabilities
C) Liabilities and owner's equity D) Equipment and liabilities
4) The balance sheet contains 4)
A) expenses, assets and cash. B) assets, liabilities and owner's equity.
C) assets, liabilities and revenues. D) liabilities, expenses and capital.
5) Go Blue Retail Store collected $12,000 of its accounts receivable. The expanded accounting 5)
equation changes include
A) Cash and Revenue increase $12,000.
B) Cash increases and Accounts Receivable decreases $12,000.
C) Accounts Receivable decreases and Capital increases $12,000.
D) Cash and Capital increase, $12,000.
6) The claims of creditors against the assets of a business are 6)
A) liabilities. B) expenses. C) assets. D) revenues.
7) How does the purchase of equipment on account affect the accounting equation? 7)
A) Assets increase; owner's equity increases.
B) Liabilities increase; owner's equity decreases.
C) Assets increase; liabilities increase.
D) Assets increase; liabilities decrease.
8) Boxes R' Us paid $2,000 in salaries and wages for February. This transaction will 8)
A) increase expenses and increase liabilities.
B) decrease assets and expenses.
C) increase expenses and decrease revenue.
D) decrease assets and increase expenses.
9) When the company pays salaries, which of the following is true? 9)
A) Assets and Expenses increase. B) Liabilities and Capital increase.
C) Assets and Capital increase. D) None of the above are correct.
10) Which of the following would be considered a subdivision of owner's equity? 10)
A) Liabilities B) Cash C) Expenses D) Assets
1
,11) An expense should be recorded when 11)
A) the expense is incurred. B) a bill is received in the mail.
C) the bill is paid. D) None of the above are correct.
12) The purchase of supplies for cash would affect which account category? 12)
A) Capital B) Assets C) Liabilities D) Expense
13) Revenue, expenses, and withdrawals are subdivisions of 13)
A) owner's equity. B) assets.
C) liabilities. D) All of these answers are correct.
14) An acceptable variation of the accounting equation is 14)
A) Assets = Liabilities - Owner's Equity. B) Assets - Liabilities = Owner's Equity.
C) Assets + Owner's Equity = Liabilities. D) All of these answers are correct.
15) This type of business organization is subject to income tax. 15)
A) sole proprietorship. B) corporation.
C) partnership. D) All of the above.
16) Bob Allen's Company sells a machine it purchased last week for cash equivalent to the original 16)
cost of $15,000. This has the effect of
A) decreasing liabilities and increasing owner's equity.
B) decreasing assets and increasing owner's equity.
C) no change to the overall accounting equation.
D) decreasing assets and decreasing liabilities.
17) Hazy Shades received and paid a utility bill for $725 for the month of March. This transaction 17)
will
A) increase Cash and increase Utility Expense.
B) increase Cash and decrease Utility Expense.
C) decrease Cash and increase Utility Expense.
D) increase Utility Expense and decrease Withdrawal.
18) A Toyota plant would be considered a 18)
A) service company. B) merchandise company.
C) manufacturer. D) None of the above are correct.
19) If total liabilities are $15,000 and owner's equity is $7,000, the total assets must be 19)
A) $8,000. B) $15,000. C) $22,000. D) $7,000.
20) A purchase of a vehicle for cash would have what affect on the accounting equation? 20)
A) Total asset amount remains the same. B) Total liabilities are overstated.
C) Total owner's equity is overstated. D) Both A and B are correct.
21) The basic accounting equation is 21)
A) Assets = Liabilities - Owner's Equity. B) Assets = Liabilities + Owner's Equity.
C) Assets = Owner's Equity - Liabilities. D) Assets = Revenues - Expenses.
2
, 22) Which of the following is correct when speaking about a business's assets? 22)
A) Assets are shown at their resale value.
B) Assets are things of value owned.
C) Assets must always equal Liabilities.
D) Assets are disclosed on the Income Statement.
23) If a company's revenues are lower than its expenses, it will cause 23)
A) an increase in owner's equity. B) a decrease in owner's equity.
C) no effect on owner's equity. D) an increase in assets.
24) The type of business organization that can continue indefinitely is known as a 24)
A) sole proprietorship. B) corporation.
C) partnership. D) None of the above.
25) If total assets are $30,000 and total liabilities are $8,000, Capital must equal 25)
A) $8,000. B) $30,000. C) $22,000. D) $38,000.
26) Bob purchased a new computer for the company on account. The transaction will 26)
A) increase Computer; increase Accounts Payable.
B) increase Computer; increase Capital.
C) decrease Cash; increase Computer.
D) decrease Cash; increase Accounts Payable.
27) The Owner's Equity of Leyla's Company is equal to one -quarter of the total assets. Liabilities 27)
equal $30,000. What is the amount of Owner's Equity?
A) $40,000 B) $30,000
C) $10,000 D) None of these answers are correct.
28) Sonya invested cash in her new business. What effect will this have? 28)
A) Decrease an asset and increase a liability.
B) Increase an asset and decrease owner's equity.
C) Increase an asset and increase a liability.
D) Increase an asset and increase owner's equity.
29) Which of the following transactions would cause one asset to increase and another asset to 29)
decrease?
A) The business bought supplies for cash.
B) The business paid a creditor.
C) The business bought inventory on credit.
D) The owner invested cash in the business.
30) Accounting provides information to 30)
A) investors. B) government.
C) managers. D) All of these answers are correct
31) When services are rendered but payment is not made, which account would be increased? 31)
A) Revenue B) Expense
C) Cash D) Accounts Payable
3
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The heading of a balance sheet (in correct order) would include 1)
A) who, what, when B) who, what, why
C) who, where, when. D) why, what, where
2) The financial statement that shows revenue and expenses for a period of time is the 2)
A) income statement. B) statement of owner's equity.
C) balance sheet. D) statement of cash flows.
3) Which of the following would have claims against the assets of the business? 3)
A) Cash and Equipment B) Cash and liabilities
C) Liabilities and owner's equity D) Equipment and liabilities
4) The balance sheet contains 4)
A) expenses, assets and cash. B) assets, liabilities and owner's equity.
C) assets, liabilities and revenues. D) liabilities, expenses and capital.
5) Go Blue Retail Store collected $12,000 of its accounts receivable. The expanded accounting 5)
equation changes include
A) Cash and Revenue increase $12,000.
B) Cash increases and Accounts Receivable decreases $12,000.
C) Accounts Receivable decreases and Capital increases $12,000.
D) Cash and Capital increase, $12,000.
6) The claims of creditors against the assets of a business are 6)
A) liabilities. B) expenses. C) assets. D) revenues.
7) How does the purchase of equipment on account affect the accounting equation? 7)
A) Assets increase; owner's equity increases.
B) Liabilities increase; owner's equity decreases.
C) Assets increase; liabilities increase.
D) Assets increase; liabilities decrease.
8) Boxes R' Us paid $2,000 in salaries and wages for February. This transaction will 8)
A) increase expenses and increase liabilities.
B) decrease assets and expenses.
C) increase expenses and decrease revenue.
D) decrease assets and increase expenses.
9) When the company pays salaries, which of the following is true? 9)
A) Assets and Expenses increase. B) Liabilities and Capital increase.
C) Assets and Capital increase. D) None of the above are correct.
10) Which of the following would be considered a subdivision of owner's equity? 10)
A) Liabilities B) Cash C) Expenses D) Assets
1
,11) An expense should be recorded when 11)
A) the expense is incurred. B) a bill is received in the mail.
C) the bill is paid. D) None of the above are correct.
12) The purchase of supplies for cash would affect which account category? 12)
A) Capital B) Assets C) Liabilities D) Expense
13) Revenue, expenses, and withdrawals are subdivisions of 13)
A) owner's equity. B) assets.
C) liabilities. D) All of these answers are correct.
14) An acceptable variation of the accounting equation is 14)
A) Assets = Liabilities - Owner's Equity. B) Assets - Liabilities = Owner's Equity.
C) Assets + Owner's Equity = Liabilities. D) All of these answers are correct.
15) This type of business organization is subject to income tax. 15)
A) sole proprietorship. B) corporation.
C) partnership. D) All of the above.
16) Bob Allen's Company sells a machine it purchased last week for cash equivalent to the original 16)
cost of $15,000. This has the effect of
A) decreasing liabilities and increasing owner's equity.
B) decreasing assets and increasing owner's equity.
C) no change to the overall accounting equation.
D) decreasing assets and decreasing liabilities.
17) Hazy Shades received and paid a utility bill for $725 for the month of March. This transaction 17)
will
A) increase Cash and increase Utility Expense.
B) increase Cash and decrease Utility Expense.
C) decrease Cash and increase Utility Expense.
D) increase Utility Expense and decrease Withdrawal.
18) A Toyota plant would be considered a 18)
A) service company. B) merchandise company.
C) manufacturer. D) None of the above are correct.
19) If total liabilities are $15,000 and owner's equity is $7,000, the total assets must be 19)
A) $8,000. B) $15,000. C) $22,000. D) $7,000.
20) A purchase of a vehicle for cash would have what affect on the accounting equation? 20)
A) Total asset amount remains the same. B) Total liabilities are overstated.
C) Total owner's equity is overstated. D) Both A and B are correct.
21) The basic accounting equation is 21)
A) Assets = Liabilities - Owner's Equity. B) Assets = Liabilities + Owner's Equity.
C) Assets = Owner's Equity - Liabilities. D) Assets = Revenues - Expenses.
2
, 22) Which of the following is correct when speaking about a business's assets? 22)
A) Assets are shown at their resale value.
B) Assets are things of value owned.
C) Assets must always equal Liabilities.
D) Assets are disclosed on the Income Statement.
23) If a company's revenues are lower than its expenses, it will cause 23)
A) an increase in owner's equity. B) a decrease in owner's equity.
C) no effect on owner's equity. D) an increase in assets.
24) The type of business organization that can continue indefinitely is known as a 24)
A) sole proprietorship. B) corporation.
C) partnership. D) None of the above.
25) If total assets are $30,000 and total liabilities are $8,000, Capital must equal 25)
A) $8,000. B) $30,000. C) $22,000. D) $38,000.
26) Bob purchased a new computer for the company on account. The transaction will 26)
A) increase Computer; increase Accounts Payable.
B) increase Computer; increase Capital.
C) decrease Cash; increase Computer.
D) decrease Cash; increase Accounts Payable.
27) The Owner's Equity of Leyla's Company is equal to one -quarter of the total assets. Liabilities 27)
equal $30,000. What is the amount of Owner's Equity?
A) $40,000 B) $30,000
C) $10,000 D) None of these answers are correct.
28) Sonya invested cash in her new business. What effect will this have? 28)
A) Decrease an asset and increase a liability.
B) Increase an asset and decrease owner's equity.
C) Increase an asset and increase a liability.
D) Increase an asset and increase owner's equity.
29) Which of the following transactions would cause one asset to increase and another asset to 29)
decrease?
A) The business bought supplies for cash.
B) The business paid a creditor.
C) The business bought inventory on credit.
D) The owner invested cash in the business.
30) Accounting provides information to 30)
A) investors. B) government.
C) managers. D) All of these answers are correct
31) When services are rendered but payment is not made, which account would be increased? 31)
A) Revenue B) Expense
C) Cash D) Accounts Payable
3
