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7. For each & every transaction there is an effect on both Assets & Liabilities:
22. A trader must record all the financial information about her business if she wants
to know the
amount of
a) her bank balance.
b) her debtors.
c) her drawings.
d) her profit.
23. What is net profit?
a) the amount of money taken out of the business by the owner during the
year
b) the cash in the business bank account
c) the difference between sales and cost of sales
d) sales revenue less cost of sales and expenses
24. Anytime an owner removes any asset for personal use it is recorded as:
a) a withdrawal.
b) payment of a liability.
c) an investment.
d) an expense.
25. The increase or decrease in the owners equity is reported on the:
a) statement of owners equity.
b) income statement.
c) balance sheet.
d) all of these
26. The purpose of the accounting process is to provide financial information on:
a) large corporations.
b) small businesses.
c) individuals.
d) All of these answers are correct.
27. Which of the following is not a business organization form?
a) Corporation
b) Sole proprietorship
c) Operation
d) Partnership
28.Owners withdrawals:
a) increase expenses.
b) increase liabilities.
c) increase assets.
d) decrease owners equity.
29. Cater Right, with total assets of $50,000, borrows $15,000 from the bank.
Which of the following is a True statement upon borrowing the money?
a) Total assets are now $35,000.
b) Owners equity is $15,000 more.
c) Total assets are now $50,000.
d) Total assets are now $65,000.
30. Mark paid $500 rent for the month. Identify the accounts affected.
a)
b)
c)
d)
31. If Suite Dream Toys revenues are less than its expenses during the accounting
period:
a) the business will incur a loss.
b) owners withdrawals decrease owners equity.
c) owner withdrawals decrease net income.
d) net income causes liabilities to decrease.
32. The financial statement that shows revenue and expenses for a period of time is
the:
a) statement of owners equity.
b) balance sheet.
c) statement of liabilities and capital.
d) income statement.
33. The purchase of a truck with a down payment was recorded as a pure cash
purchase. This error would cause:
a) liabilities were understated.
b) assets were overstated.
c) owners equity was overstated.
d) None of the above are correct.
34. The business provided services to a credit customer.
a) Assets and owners equity increase.
b) Assets and revenue increase.
c) Liabilities and owners equity increase.
d) None of the above are correct.
35. Which of the following transactions would cause an asset to increase and the
owners equity to increase?
a) The business bought supplies on account.
b) The owner invested cash in the business.
c) The business incurred an expense on credit.
d) The owner withdrew cash from the business.
36. Which of the following would result if the business provided services to a
customer collecting cash?
a) Cash would increase and Revenue would decrease.
b) Since the cash was collected there is no need to record this.
c) Cash would increase and Capital would increase.
d) Cash would increase and Revenue would increase.
37. A formal account that has columns for date, explanation, post reference,
debit, and credit is called the:
a) T account.
b) ledger.
c) chart of accounts.