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: If a company issues common stock for $50,000 cash, what is the effect on the accounting equation?

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

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

If a business receives $5,000 cash from a customer for services to be performed next month, which account is credited?

Accepted Answer

Unearned Revenue

Question 4

Which financial statement shows the ending balance of 'accounts receivable'?

Accepted Answer

Balance Sheet

Question 5

A company has $$120,000 in assets, 40$$,000 in liabilities, and $$80,000 in shareholder's equity. If it pays off 10$$,000 of its liabilities with cash, what is the new value of assets?

Accepted Answer

$$110,000$$

Question 6

Which of the following best describes the matching principle?

Accepted Answer

Expenses should be reported in the same period as the revenue they help generate.

Question 7

If 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 8

Which account is increased when a company receives payment from a customer for a previous sale on account?

Accepted Answer

Cash

Question 9

A company prepaid $12,000 for six months of rent on October 1. What is the rent expense recognized for October, assuming monthly adjustments?

Accepted Answer

$$1,000$$

Question 10

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

Accepted Answer

Supplies Expense

Question 11

If a company has current assets of $$500,000, long-term assets of 720$$,000, current liabilities of $$250,000, and long-term liabilities of 450$$,000, what is the current ratio?

Accepted Answer

$$2.0$$

Question 12

Which of the following is the most accurate statement regarding ethics in accounting?

Accepted Answer

Ethics involves making difficult choices under pressure and should be kept in mind in making every decision, including those involving accounting.

Question 13

Which of the following is NOT a fundamental qualitative characteristic of useful financial information?

Accepted Answer

Relevancy and faithful representation

Question 14

If a company has a beginning balance of $$500 in supplies, purchases 750 of $$supplies during the period, and has $200 of supplies remaining at the end, what was the supplies expense for the period?

Accepted Answer

$$950$$

Question 15

Which principle is violated if a company prepares financial statements assuming it will not continue as a going concern?

Accepted Answer

Going Concern (Continuity) Assumption

Question 16

When is revenue recognized according to U.S. GAAP?

Accepted Answer

When the service/product has been delivered

Question 17

Which of the following best describes the stable monetary unit assumption?

Accepted Answer

All transactions are recorded in the same currency and do not lose their purchasing power over time.

Question 18

If a company has $$25,000 beginning balance in accounts receivable, 6$$,000 ending balance, and $30,000 in sales on account, how much were cash collections?

Accepted Answer

$$49,000$$

Question 19

Which account is debited when merchandise is sold on account?

Accepted Answer

Accounts Receivable

Question 20

When a company pays cash for an expense, what is the journal entry?

Accepted Answer

Debit Expense and credit Cash

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

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