Q: Which of the following correctly expresses the basic accounting equation?

$$\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$$

Q: A company purchases equipment for $15,000 cash. What is the effect on the accounting equation?

$$\text{Assets}$$ unaffected, $$\text{Liabilities}$$ unaffected, $$\text{Owner's Equity}$$ unaffected

Q: A company issues common stock for $50,000 cash. What is the effect on the accounting equation?

$$\text{Assets}$$ increase, $$\text{Liabilities}$$ unaffected, $$\text{Owner's Equity}$$ increase

Q: If a company borrows $10,000 from the bank, what is the effect on the accounting equation?

$$\text{Assets}$$ increase, $$\text{Liabilities}$$ increase, $$\text{Owner's Equity}$$ unaffected

Question 1

Which of the following correctly expresses the basic accounting equation?

Accepted Answer

$$	ext{Assets} = 	ext{Liabilities} + 	ext{Owner's Equity}$$

Question 2

A company purchases equipment for $15,000 cash. What is the effect on the accounting equation?

Accepted Answer

$$	ext{Assets}$$ unaffected, $$	ext{Liabilities}$$ unaffected, $$	ext{Owner's Equity}$$ unaffected

Question 3

Which financial statement shows a company's financial position at a specific point in time?

Accepted Answer

Balance Sheet

Question 4

If a company has $$120,000 in assets and 40$$,000 in liabilities, what is the amount of owner's equity?

Accepted Answer

$$80,000$$

Question 5

Which of the following accounts would be closed at the end of the accounting period?

Accepted Answer

Supplies Expense

Question 6

A company receives $5,000 cash from a customer for services to be performed next month. How should this transaction be recorded?

Accepted Answer

Debit Cash, Credit Unearned Revenue

Question 7

If accounts receivable has a beginning balance of $$12,000, ending balance of 6$$,000, and $30,000 in sales on account, how much were cash collections?

Accepted Answer

$$36,000$$

Question 8

Which principle requires that expenses be reported in the same period as the revenues they help to generate?

Accepted Answer

Matching Principle

Question 9

A company issues common stock for $50,000 cash. What is the effect on the accounting equation?

Accepted Answer

$$	ext{Assets}$$ increase, $$	ext{Liabilities}$$ unaffected, $$	ext{Owner's Equity}$$ increase

Question 10

Which qualitative characteristic of accounting information requires that information be complete, neutral, and free from error?

Accepted Answer

Faithful representation

Question 11

A company prepaid $12,600 for six months of rent on October 1. What is the rent expense recognized for October, assuming monthly adjustments are made at the end of each month?

Accepted Answer

$$2,100$$

Question 12

Which of the following is NOT a characteristic of the stable monetary unit assumption?

Accepted Answer

Assets are reported at their current market value

Question 13

If a company pays $1,000 cash for supplies, what is the journal entry?

Accepted Answer

Debit Supplies, Credit Cash

Question 14

Which account is increased by a credit?

Accepted Answer

Owner's Equity

Question 15

A company has $$500,000 in current assets, 250$$,000 in current liabilities, and $450,000 in long-term liabilities. What is the current ratio?

Accepted Answer

$$2.0$$

Question 16

Which of the following best describes the entity assumption?

Accepted Answer

The owner's finances must be kept separate from the company's finances

Question 17

If a company borrows $10,000 from the bank, what is the effect on the accounting equation?

Accepted Answer

$$	ext{Assets}$$ increase, $$	ext{Liabilities}$$ increase, $$	ext{Owner's Equity}$$ unaffected

Question 18

Which of the following accounts is a liability?

Accepted Answer

Accounts Payable

Question 19

Which financial statement reports the revenues and expenses for a period of time?

Accepted Answer

Income Statement

Question 20

A company earned $$250,000 in revenues, incurred 100$$,000 in expenses, and paid $15,000 in dividends. What is net income?

Accepted Answer

$$150,000$$

Financial Accounting Fundamentals: Key Concepts, Principles, and Exam Practice

Study Guide - Practice Questions

Study Guide - Flashcards