,Chapter 1—Asset, Liability, Owner's Equity, Revenue, and Expense Accounts
MULTIPLE CHOICE
1. The purchase of an asset (like Equipment) on account will
a. increase total liabilities and decrease total assets.
b. have no effect on total assets or total liabilities.
c. increase total assets and increase total liabilities.
d. increase total assets and increase owner's equity.
e. increase total assets and decrease owner's equity.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-1 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Comprehension
2. Amounts owed by a business are referred to as
a. assets.
b. equities.
c. liabilities.
d. capital.
e. expenses.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-1 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Knowledge
3. Which of the following equations is the fundamental accounting equation?
a. Assets Liabilities = Owner's Equity
b. Assets = Liabilities + Owner's Equity
c. Assets + Liabilities = Owner's Equity
d. Assets Owner's Equity = Liabilities
e. Assets + Owner's Equity = Liabilities
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-1 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Application
4. When an owner deposits cash in an account in the name of the business, it is an increase to
a. Cash and Accounts Receivable.
b. Cash and Drawing.
c. Cash and Capital.
d. Cash and Accounts Payable.
e. Cash and Rent Expense.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Comprehension
5. Which of the following is not considered an account?
a. Equipment
b. Revenues
c. Accounts Payable
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
, d. Cash
e. Accounts Receivable
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Knowledge
6. If an owner invests her computer and printer in the business, there is an increase to
a. Cash and Capital.
b. Computer Equipment and Drawing.
c. Cash and Drawing.
d. Computer Equipment and Capital.
e. Computer Equipment and Cash.
ANS: D PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 1-2 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Comprehension
7. The owner of a business invested $5,000 in the business. What are the effects on the fundamental
accounting equation?
a. Assets increase $5,000; liabilities, no effect; owner's equity increases $5,000
b. Assets increase $5,000; liabilities decrease $5,000; owner's equity increases $5,000
c. Assets increase $5,000; liabilities increase $5,000; owner's equity, no effect
d. Assets increase $5,000; liabilities, no effect; owner's equity decreases $5,000
e. Assets decrease $5,000; liabilities, no effect; owner's equity increases $5,000
ANS: A PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
8. The purchase of an asset for cash will
a. increase total assets and decrease total liabilities.
b. have no effect on total assets or total liabilities.
c. increase total assets and increase total liabilities.
d. increase total assets and increase total owner's equity.
e. increase total assets and decrease total owner's equity.
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
9. Over a period of time, if total assets increase by $27,000 and total liabilities increase by $7,000, then
owner's equity will be increased by
a. $7,000.
b. $34,000.
c. $27,000.
d. $20,000.
e. none of these.
ANS: D PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
, KEY: Bloom's: Application
10. When the rent for the business is paid with a check,
a. Cash is decreased and Rent Expense is decreased.
b. Cash is decreased and Rent Income is increased.
c. Cash is decreased and Rent Expense is increased.
d. Cash is decreased and Accounts Payable is decreased.
e. Cash is increased and Rent Expense is decreased.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
11. A business received $600 cash from charge customers to apply on account. The effect of the
transaction is an increase in an asset and a(n)
a. increase in revenue.
b. decrease in capital.
c. decrease in a liability.
d. decrease in an asset.
e. increase in capital.
ANS: D PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
12. Which of the following is a form of revenue?
a. A check paying a mortgage
b. A credit purchase invoice
c. Credit sales to charge customers
d. A cash purchase invoice
e. A check paying utilities
ANS: C PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 1-3 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Comprehension
13. The purchase of supplies for cash will
a. increase Supplies and decrease Cash.
b. increase Supplies Expense and decrease Cash.
c. decrease Cash and increase Accounts Payable.
d. increase Supplies Expense and increase Accounts Payable.
e. decrease Cash and increase Capital.
ANS: A PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 1-4 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
14. Which of the following transactions does not include an increase to expenses?
a. Received and paid the phone bill
b. Paid monthly rent
c. Received cash for services performed
d. Paid the week's wages
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
MULTIPLE CHOICE
1. The purchase of an asset (like Equipment) on account will
a. increase total liabilities and decrease total assets.
b. have no effect on total assets or total liabilities.
c. increase total assets and increase total liabilities.
d. increase total assets and increase owner's equity.
e. increase total assets and decrease owner's equity.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-1 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Comprehension
2. Amounts owed by a business are referred to as
a. assets.
b. equities.
c. liabilities.
d. capital.
e. expenses.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-1 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Knowledge
3. Which of the following equations is the fundamental accounting equation?
a. Assets Liabilities = Owner's Equity
b. Assets = Liabilities + Owner's Equity
c. Assets + Liabilities = Owner's Equity
d. Assets Owner's Equity = Liabilities
e. Assets + Owner's Equity = Liabilities
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-1 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Application
4. When an owner deposits cash in an account in the name of the business, it is an increase to
a. Cash and Accounts Receivable.
b. Cash and Drawing.
c. Cash and Capital.
d. Cash and Accounts Payable.
e. Cash and Rent Expense.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Comprehension
5. Which of the following is not considered an account?
a. Equipment
b. Revenues
c. Accounts Payable
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
, d. Cash
e. Accounts Receivable
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Knowledge
6. If an owner invests her computer and printer in the business, there is an increase to
a. Cash and Capital.
b. Computer Equipment and Drawing.
c. Cash and Drawing.
d. Computer Equipment and Capital.
e. Computer Equipment and Cash.
ANS: D PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 1-2 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Comprehension
7. The owner of a business invested $5,000 in the business. What are the effects on the fundamental
accounting equation?
a. Assets increase $5,000; liabilities, no effect; owner's equity increases $5,000
b. Assets increase $5,000; liabilities decrease $5,000; owner's equity increases $5,000
c. Assets increase $5,000; liabilities increase $5,000; owner's equity, no effect
d. Assets increase $5,000; liabilities, no effect; owner's equity decreases $5,000
e. Assets decrease $5,000; liabilities, no effect; owner's equity increases $5,000
ANS: A PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
8. The purchase of an asset for cash will
a. increase total assets and decrease total liabilities.
b. have no effect on total assets or total liabilities.
c. increase total assets and increase total liabilities.
d. increase total assets and increase total owner's equity.
e. increase total assets and decrease total owner's equity.
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
9. Over a period of time, if total assets increase by $27,000 and total liabilities increase by $7,000, then
owner's equity will be increased by
a. $7,000.
b. $34,000.
c. $27,000.
d. $20,000.
e. none of these.
ANS: D PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
, KEY: Bloom's: Application
10. When the rent for the business is paid with a check,
a. Cash is decreased and Rent Expense is decreased.
b. Cash is decreased and Rent Income is increased.
c. Cash is decreased and Rent Expense is increased.
d. Cash is decreased and Accounts Payable is decreased.
e. Cash is increased and Rent Expense is decreased.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
11. A business received $600 cash from charge customers to apply on account. The effect of the
transaction is an increase in an asset and a(n)
a. increase in revenue.
b. decrease in capital.
c. decrease in a liability.
d. decrease in an asset.
e. increase in capital.
ANS: D PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 1-2 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
12. Which of the following is a form of revenue?
a. A check paying a mortgage
b. A credit purchase invoice
c. Credit sales to charge customers
d. A cash purchase invoice
e. A check paying utilities
ANS: C PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 1-3 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Comprehension
13. The purchase of supplies for cash will
a. increase Supplies and decrease Cash.
b. increase Supplies Expense and decrease Cash.
c. decrease Cash and increase Accounts Payable.
d. increase Supplies Expense and increase Accounts Payable.
e. decrease Cash and increase Capital.
ANS: A PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 1-4 NAT: AACSB: Analytic
STA: AICPA-FN: Measurement|ACBSP: Recording Transactions
KEY: Bloom's: Application
14. Which of the following transactions does not include an increase to expenses?
a. Received and paid the phone bill
b. Paid monthly rent
c. Received cash for services performed
d. Paid the week's wages
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
