,Test Bank For Technical Writing for Success, 4th 4th Edition
Chapter 1
1. The accounting equation is most often stated as Assets + Liabilities
= Owner’s Equity.
a. True
*b. False
2. After each transaction, the accounting equation must remain in
balance.
*a. True
b. False
3. A negative amount for net worth would reflect more debt than assets,
something a creditor would favor.
a. True
*b. False
4. When two asset accounts are changed in a transaction, there must be
an increase and a decrease.
*a. True
b. False
5. Detailed information about changes in owner’s equity is needed by
owners and managers to make sound business decisions.
*a. True
b. False
6. When items are bought and paid for at a future date, another way to
state this is to say these items are bought on account.
*a. True
b. False
7. A transaction for the sale of goods or services results in a
decrease in owner’s equity.
a. True
*b. False
8. Keeping separate the financial records for a business and for its
owner’s personal belongings is an application of the Business Entity
accounting concept.
*a. True
1
,Test Bank For Technical Writing for Success, 4th 4th Edition
Chapter 1
b. False
9. An expense is a decrease in owner’s equity resulting from the
operation of a business.
*a. True
b. False
10. Business ethics are the principles of right and wrong that guide an
individual in making decisions.
a. True
*b. False
11. Payments for advertising, equipment repairs, utilities, and rent
are liabilities.
a. True
*b. False
12. Withdrawals are assets taken out of a business for the owner’s
personal use.
*a. True
b. False
13. The most common type of withdrawal by an owner from a business is
the withdrawal of cash.
*a. True
b. False
14. When an owner withdraws cash from the business, the transaction
affects both assets and owner’s equity.
*a. True
b. False
15. A withdrawal is an expense.
a. True
*b. False
16. Directions: Select the one term that best fits each definition.
Print the letter identifying your choice on the line to the left of the
statement.
2
, Test Bank For Technical Writing for Success, 4th 4th Edition
Chapter 1
[e] 1. A formal report that shows what an individual owns,
what an individual owes, and the difference between the two.
[j] 2. Planning, recording, analyzing, and interpreting
financial information.
[m] 3. An equation showing the relationship among assets,
liabilities, and owner’s equity.
[z] 4. A business activity that changes assets, liabilities,
or owner’s equity.
[k] 5. A planned process for providing financial information
that will be useful to management.
[g] 6. The standards and rules that accountants follow while
recording and reporting financial activities.
[u] 7. The account used to summarize the owner’s equity in the
business.
[a] 8. The amount remaining after the value of all liabilities
is subtracted from the value of all assets.
[l] 9. A record summarizing all the information pertaining to
a single item in the accounting equation.
[i] 10. The difference between personal assets and personal
liabilities.
[z] 11. Anything of value that is owned.
[z] 12. A sale for which cash will be received at a later
date.
[z] 13. Assets taken out of a business for the owner’s
personal use.
[z] 14. A formal written document that describes the nature of
a business and how it will operate.
[z] 15. A business owned by one person.
[z] 16. The use of ethics in making business decisions.
[z] 17. A business that performs an activity for a fee.
[z] 18. The difference between assets and liabilities.
[z] 19. Financial reports that summarize the financial
conditions and operations of business.
[z] 20. An amount owed by a business.
[z] 21. A person or business to whom a liability is owed.
[z] 22. A decrease in owner’s equity resulting from the
operation of a business.
[z] 23. An increase in owner’s equity resulting from the
operation of a business.
[z] 24. The amount in an account.
[z] 25. The name given to an account.
[z] 26. Financial rights to the assets of a business.
a. owner’s equity
b. withdrawals
c. business plan
d. equity
e. net worth statement
f. business ethics
g. GAAP
h. revenue
i. personal net worth
j. accounting
k. accounting system
l. account
3
Chapter 1
1. The accounting equation is most often stated as Assets + Liabilities
= Owner’s Equity.
a. True
*b. False
2. After each transaction, the accounting equation must remain in
balance.
*a. True
b. False
3. A negative amount for net worth would reflect more debt than assets,
something a creditor would favor.
a. True
*b. False
4. When two asset accounts are changed in a transaction, there must be
an increase and a decrease.
*a. True
b. False
5. Detailed information about changes in owner’s equity is needed by
owners and managers to make sound business decisions.
*a. True
b. False
6. When items are bought and paid for at a future date, another way to
state this is to say these items are bought on account.
*a. True
b. False
7. A transaction for the sale of goods or services results in a
decrease in owner’s equity.
a. True
*b. False
8. Keeping separate the financial records for a business and for its
owner’s personal belongings is an application of the Business Entity
accounting concept.
*a. True
1
,Test Bank For Technical Writing for Success, 4th 4th Edition
Chapter 1
b. False
9. An expense is a decrease in owner’s equity resulting from the
operation of a business.
*a. True
b. False
10. Business ethics are the principles of right and wrong that guide an
individual in making decisions.
a. True
*b. False
11. Payments for advertising, equipment repairs, utilities, and rent
are liabilities.
a. True
*b. False
12. Withdrawals are assets taken out of a business for the owner’s
personal use.
*a. True
b. False
13. The most common type of withdrawal by an owner from a business is
the withdrawal of cash.
*a. True
b. False
14. When an owner withdraws cash from the business, the transaction
affects both assets and owner’s equity.
*a. True
b. False
15. A withdrawal is an expense.
a. True
*b. False
16. Directions: Select the one term that best fits each definition.
Print the letter identifying your choice on the line to the left of the
statement.
2
, Test Bank For Technical Writing for Success, 4th 4th Edition
Chapter 1
[e] 1. A formal report that shows what an individual owns,
what an individual owes, and the difference between the two.
[j] 2. Planning, recording, analyzing, and interpreting
financial information.
[m] 3. An equation showing the relationship among assets,
liabilities, and owner’s equity.
[z] 4. A business activity that changes assets, liabilities,
or owner’s equity.
[k] 5. A planned process for providing financial information
that will be useful to management.
[g] 6. The standards and rules that accountants follow while
recording and reporting financial activities.
[u] 7. The account used to summarize the owner’s equity in the
business.
[a] 8. The amount remaining after the value of all liabilities
is subtracted from the value of all assets.
[l] 9. A record summarizing all the information pertaining to
a single item in the accounting equation.
[i] 10. The difference between personal assets and personal
liabilities.
[z] 11. Anything of value that is owned.
[z] 12. A sale for which cash will be received at a later
date.
[z] 13. Assets taken out of a business for the owner’s
personal use.
[z] 14. A formal written document that describes the nature of
a business and how it will operate.
[z] 15. A business owned by one person.
[z] 16. The use of ethics in making business decisions.
[z] 17. A business that performs an activity for a fee.
[z] 18. The difference between assets and liabilities.
[z] 19. Financial reports that summarize the financial
conditions and operations of business.
[z] 20. An amount owed by a business.
[z] 21. A person or business to whom a liability is owed.
[z] 22. A decrease in owner’s equity resulting from the
operation of a business.
[z] 23. An increase in owner’s equity resulting from the
operation of a business.
[z] 24. The amount in an account.
[z] 25. The name given to an account.
[z] 26. Financial rights to the assets of a business.
a. owner’s equity
b. withdrawals
c. business plan
d. equity
e. net worth statement
f. business ethics
g. GAAP
h. revenue
i. personal net worth
j. accounting
k. accounting system
l. account
3
