Q: Which equation expresses the basic relationship in accounting?

$\text{Assets} = \text{Liabilities} + \text{Stockholders' Equity}$

Q: Which of the following is the correct expanded accounting equation including revenues and expenses?

$\text{Assets} = \text{Liabilities} + \text{Common Stock} + \text{Retained Earnings} + \text{Revenues} - \text{Expenses} - \text{Dividends}$

Question 1

Which of the following best describes a business transaction in financial accounting?

Accepted Answer

Any event that has a financial impact on the business and can be measured reliably.

Question 2

Which equation expresses the basic relationship in accounting?

Accepted Answer

$	ext{Assets} = 	ext{Liabilities} + 	ext{Stockholders' Equity}$

Question 3

Alladin Travel, Inc. purchases land for $40,000 cash. What is the effect on the accounting equation?

Accepted Answer

Increase one asset (land) and decrease another asset (cash) by $40,000; total assets remain unchanged.

Question 4

Which of the following is NOT considered an asset account?

Accepted Answer

Notes Payable

Question 5

If a company performs services on account, which accounts are affected and how?

Accepted Answer

Increase Accounts Receivable and increase Service Revenue.

Question 6

Which of the following transactions would NOT be recorded in the company's accounting records?

Accepted Answer

Owner remodels her personal home using her own funds.

Question 7

What is the effect on the accounting equation when Alladin Travel, Inc. pays $1,900 on account?

Accepted Answer

Decrease assets and decrease liabilities by $1,900.

Question 8

Which account is increased by a debit entry?

Accepted Answer

Cash

Question 9

Which of the following is the correct expanded accounting equation including revenues and expenses?

Accepted Answer

$	ext{Assets} = 	ext{Liabilities} + 	ext{Common Stock} + 	ext{Retained Earnings} + 	ext{Revenues} - 	ext{Expenses} - 	ext{Dividends}$

Question 10

A company starts the month with $1,000 cash, receives $8,000 cash during the month, and ends with $3,000 cash. How much cash was paid out during the month?

Accepted Answer

$6,000$

Question 11

Which of the following accounts normally has a credit balance?

Accepted Answer

Retained Earnings

Question 12

When Alladin Travel, Inc. declares and pays a dividend of $2,100, what is the effect on the accounting equation?

Accepted Answer

Decrease assets and decrease stockholders' equity by $2,100.

Question 13

Which of the following is the correct journal entry for receiving $50,000 cash and issuing common stock?

Accepted Answer

Debit Cash $50,000; Credit Common Stock $50,000

Question 14

Which of the following is true about the double-entry accounting system?

Accepted Answer

Each transaction affects at least two accounts.

Question 15

If a company purchases supplies for $3,700 on account, what is the correct journal entry?

Accepted Answer

Debit Supplies $3,700; Credit Accounts Payable $3,700

Question 16

Which account is decreased by a credit entry?

Accepted Answer

Cash

Question 17

A trial balance is prepared to:

Accepted Answer

List all accounts and their balances to ensure debits equal credits.

Question 18

Which of the following is a liability account?

Accepted Answer

Accounts Payable

Question 19

If the beginning balance of Accounts Receivable is $6,000, sales on account are $10,000, collections on account are $11,000, what is the ending balance?

Accepted Answer

$5,000$

Question 20

Which of the following best describes the purpose of a chart of accounts?

Accepted Answer

To list all accounts and their account numbers in numerical sequence.

Financial Accounting: Chapter 2 – Transaction Analysis and the Accounting Cycle

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