Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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Recording and reporting a business's financial information separately from
the owner's financial information is an application of the accounting concept ____.
a. | Unit of Measurement | c. | Going Concern | b. | Business Entity | d. | Separation of
Records |
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2.
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The amount remaining after the value of all liabilities is subtracted from the
value of all assets is ____.
a. | the fair market value of the business | c. | a financial
report | b. | owner's equity | d. | a transaction |
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3.
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The accounting equation is most often stated as ____.
a. | Assets = Liabilities | c. | Assets = Liabilities + Owner's Equity | b. | Cash =
Assets | d. | Liabilities + Assets
= Owner's Equity |
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4.
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In the United States, recording business transactions in dollars is an
application of the accounting concept ____.
a. | Unit of Measurement | c. | Going Concern | b. | Business Entity | d. | Separation of
Records |
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5.
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The account used to summarize the owner's equity in a business is
____.
a. | equity | c. | capital | b. | owner's equity | d. | a liability |
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6.
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If cash is increased by $2,000.00 when the owner invests cash in the business,
then capital is ____.
a. | increased by $2,000.00 | c. | increased by $1,000.00 | b. | decreased by
$2,000.00 | d. | not
changed |
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7.
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When a transaction changes both sides of the accounting equation, ____.
a. | an increase on the right side must offset a decrease on the left
side | b. | an increase on the left side must equal an increase on the right
side | c. | neither side of the equation changes | d. | none of the
above |
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8.
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When a business pays cash for supplies, ____.
a. | liabilities increase | c. | assets and liabilities decrease | b. | assets and
liabilities increase | d. | assets
increase and assets decrease |
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9.
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When cash is decreased and supplies are increased by an equal amount,
____.
a. | there is an increase in liabilities | c. | there is a decrease in
liabilities | b. | there is an increase in owner's equity | d. | liabilities and capital are not
changed |
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10.
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When a transaction changes only one side of the equation, if one account is
increased, the other account on the same side must ____.
a. | increase | c. | not change | b. | decrease | d. | none of the
above |
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11.
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Prepaid Insurance is ____.
a. | an asset account | c. | an owner's equity account | b. | a liability
account | d. | none of the
above |
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12.
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Buying items and paying for them at a future date is ____.
a. | not recommended | c. | illegal | b. | not a common business
practice | d. | a common business
practice |
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13.
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When a business buys supplies on account, assets ____.
a. | increase | c. | decrease | b. | increase and liabilities
decrease | d. | decrease and
liabilities increase |
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14.
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When supplies are bought on account, the business to whom money is owed is
____.
a. | an asset account | c. | an equity account | b. | a liability account | d. | a capital
account |
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15.
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When cash is paid on account, ____.
a. | two assets are changed | b. | one asset and owner's equity are
changed | c. | one liability and owner's equity are changed | d. | one asset and one
liability are changed |
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16.
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Total assets are $22,000.00. Supplies are bought on account for $1,500.00. The
total assets are now ____.
a. | $22,000.00 | c. | $20,500.00 | b. | $23,500.00 | d. | $25,000.00 |
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17.
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Total assets are $19,500.00. Cash is paid for $1,500.00 of supplies. The total
assets are now ____.
a. | $19,500.00 | c. | $18,000.00 | b. | $21,000.00 | d. | $22,500.00 |
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18.
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To start a business, the owner invested $8,000.00, bought $1,500.00 of supplies,
insurance coverage of $500.00, and bought an additional $300.00 of supplies on account. Total assets
are ____.
a. | $5,700.00 | c. | $6,000.00 | b. | $7,000.00 | d. | none of the
above |
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19.
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A business has total cash of $30,000.00. Then the business pays $1,000.00 on
account, buys insurance coverage of $750.00, buys supplies for $1,200.00, and pays $300.00 more on
account. The balance of the cash account is now ____.
a. | $25,750.00 | c. | $28,700.00 | b. | $26,750.00 | d. | none of the
above |
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20.
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A business has total assets of $30,000.00. Then the business pays $1,000.00 on
account, buys insurance coverage of $750.00, buys supplies for $1,200.00, and pays $300.00 more on
account. Total assets are now ____.
a. | $25,750.00 | c. | $28,700.00 | b. | $26,750.00 | d. | none of the
above |
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21.
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A transaction that increases accounts receivable and increases owner's
equity is ____.
a. | revenue | c. | expense | b. | withdrawal | d. | none of the
above |
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22.
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A transaction that increases cash and decreases owner's equity is
____.
a. | revenue | c. | expense | b. | withdrawal | d. | none of the
above |
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23.
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Cash is increased by ____.
a. | withdrawals | c. | revenue | b. | expenses | d. | none of the
above |
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24.
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The asset most commonly withdrawn by business owners is ____.
a. | insurance | c. | cash | b. | supplies | d. | contributions |
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25.
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A decrease in owner's equity resulting from the operation of a business is
____.
a. | a withdrawal | c. | revenue | b. | an expense | d. | none of the
above |
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26.
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A record summarizing all the information pertaining to a single item in the
accounting equation is ____.
a. | a debit | c. | an account | b. | a credit | d. | a T account |
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27.
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In a T account, the debit side is ____.
a. | the left side | c. | both A and B | b. | the right side | d. | neither A nor B |
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28.
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The right side of a T account is the ____.
a. | debit side | c. | normal balance side | b. | credit side | d. | equity side |
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29.
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If an amount is recorded on the side of a T account opposite the normal balance
side, the account balance is ____.
a. | increased | c. | unaffected | b. | decreased | d. | correct |
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30.
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The normal balance side of an asset account is the ____.
a. | debit side | c. | decrease side | b. | credit side | d. | right side |
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31.
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When the owner invests cash in a business, the owner's capital account is
____.
a. | increased by a debit | c. | decreased by a debit | b. | increased by a credit | d. | decreased by a
credit |
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32.
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When a business pays for insurance, Prepaid Insurance is ____.
a. | increased by a debit | c. | decreased by a debit | b. | increased by a credit | d. | decreased by a
credit |
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33.
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When a business buys an asset on one date and agrees to pay on a later date, the
transaction is ____.
a. | delayed | c. | increased | b. | on account | d. | none of the
above |
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34.
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When a business pays cash on account, a liability account is ____.
a. | increased by a debit | c. | decreased by a debit | b. | increased by a credit | d. | decreased by a
credit |
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35.
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When cash is received from sales, the change in the owner's equity is
usually ____.
a. | recorded in a separate revenue account | b. | recorded directly in the owner's capital
account | c. | recorded as interest revenue | d. | always recorded on the debit
side |
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36.
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When a business receives revenue, Sales is ____.
a. | increased by a debit | c. | decreased by a debit | b. | increased by a credit | d. | decreased by a
credit |
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37.
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The amount paid for rent is recorded as a debit to ____.
a. | Miscellaneous Expense | c. | Supplies | b. | Rent Expense | d. | Cash |
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38.
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When cash is paid for rent, Rent Expense is ____.
a. | increased by a debit | c. | decreased by a debit | b. | increased by a credit | d. | decreased by a
credit |
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39.
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When the owner withdraws cash, the owner's drawing account is ____.
a. | increased by a debit | c. | decreased by a debit | b. | increased by a credit | d. | decreased by a
credit |
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40.
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A drawing account has a normal ____.
a. | debit balance and is increased by a debit | b. | credit balance and
is increased by a credit | c. | debit balance and is increased by a
credit | d. | credit balance and is decreased by a credit |
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41.
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The values of all things owned (assets) are on the accounting equation's
____.
a. | left side | c. | credit side | b. | right side | d. | none of the
above |
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42.
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The values of all equities or claims against the assets (liabilities and
owner's equity) are on the accounting equation's ____.
a. | left side | c. | debit side | b. | right side | d. | none of the
above |
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43.
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An amount recorded on the left side of a T account is ____.
a. | a debit | c. | normal balance | b. | a credit | d. | none of the
above |
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44.
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The normal balance side of any liability account is ____.
a. | the debit side | c. | the left side | b. | the credit side | d. | none of the
above |
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45.
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The normal balance side of an owner's capital account is ____.
a. | the debit side | c. | the left side | b. | the credit side | d. | none of the
above |
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46.
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Debits must equal credits ____.
a. | in a T account | c. | on the equation's right side | b. | in the
equation's left side | d. | in all transactions |
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47.
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Decreases in an asset account are shown on a T account's ____.
a. | debit side | c. | balance side | b. | credit side | d. | none of the
above |
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48.
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Decreases in any liability account are shown on a T account's ____.
a. | debit side | c. | right side | b. | credit side | d. | none of the
above |
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49.
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Increases in an owner's capital account are shown on a T account's
____.
a. | debit side | c. | left side | b. | credit side | d. | none of the
above |
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50.
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Increases in a revenue account are shown on a T account's ____.
a. | debit side | c. | left side | b. | credit side | d. | none of the
above |
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51.
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The normal balance side of any revenue account is ____.
a. | the debit side | c. | the left side | b. | the credit side | d. | none of the
above |
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52.
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The normal balance side of any expense account is ____.
a. | the debit side | c. | the right side | b. | the credit side | d. | none of the
above |
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53.
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When services are sold on account for $500.00, ____.
a. | Sales is decreased with a debit and Accounts Receivable is increased with a
credit | b. | Sales is increased with a debit and Accounts Receivable is increased with a
credit | c. | Sales is increased with a credit and Accounts Receivable is increased with a
debit | d. | Sales is increased with a debit and Accounts Receivable is increased with a
debit |
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54.
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When $1,500.00 cash is received on account, ____.
a. | Sales is increased with a credit and Cash is increased with a
credit | b. | Accounts Receivable is increased with a debit and Cash is increased with a
credit | c. | Accounts Receivable is decreased with a credit and Cash is increased with a
debit | d. | Accounts Receivable is decreased with a debit and Cash is increased with a
debit |
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55.
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A sale on account ____.
a. | increases an owner's equity account and increases an asset
account | b. | increases a liability account and increases an asset account | c. | increases an
owner's equity account and increases a liability account | d. | increases an
owner's equity account and decreases a liability account |
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