Q: What is the correct form of the accounting equation?

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

Question 1

Which of the following best describes the purpose of Generally Accepted Accounting Principles (GAAP)?

Accepted Answer

To ensure consistency, reliability, and comparability of financial statements across organizations.

Question 2

A company records its owner's personal expenses as business expenses. Which accounting principle is violated?

Accepted Answer

Economic Entity Assumption

Question 3

What is the correct form of the accounting equation?

Accepted Answer

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

Question 4

Which of the following is included in the equity section of the accounting equation?

Accepted Answer

Common Stock

Question 5

A company performs a service in December but does not receive payment until January. Which accounts are affected at the time the service is performed?

Accepted Answer

Accounts Receivable and Service Revenue

Question 6

A company purchases land for $$100,000, pays 25$$,000 in cash, and finances the remaining $75,000. What is the effect on the accounting equation?

Accepted Answer

Assets increase $$100,000; Cash decreases 25$$,000; Liabilities increase $75,000

Question 7

Which is the correct order for preparing financial statements?

Accepted Answer

Income Statement, Statement of Retained Earnings, Balance Sheet

Question 8

If beginning equity is $$10,000, net income is 5$$,000, and ending equity is $13,000, what were the dividends paid during the period?

Accepted Answer

$$\2$$,000$

Question 9

Which account increases with a debit?

Accepted Answer

Cash

Question 10

What is the normal balance of the Retained Earnings account?

Accepted Answer

Credit

Question 11

Which of the following best describes the chart of accounts?

Accepted Answer

A list of all accounts used by a company in its accounting system.

Question 12

Which of the following is the correct definition of posting in accounting?

Accepted Answer

Transferring journal entry information to the ledger accounts.

Question 13

Under cash basis accounting, when is revenue recorded?

Accepted Answer

When cash is received.

Question 14

Which principle requires expenses to be recorded in the same period as the related revenues?

Accepted Answer

Matching Principle

Question 15

A company purchased supplies costing $$2,000. At the end of the period, 500 $$worth of supplies remain. What is the amount of supplies used during the period?

Accepted Answer

$$\1$$,500$

Question 16

Which of the following is a deferred expense?

Accepted Answer

Prepaid Insurance

Question 17

What is the effect on net income and assets if an accrued revenue adjusting entry is omitted?

Accepted Answer

Net income and assets are understated.

Question 18

Which of the following best describes liquidity?

Accepted Answer

The ability to convert assets into cash quickly.

Question 19

Which accounts are NOT included in the post-closing trial balance?

Accepted Answer

Temporary accounts such as revenues, expenses, and dividends.

Question 20

The current ratio is calculated as:

Accepted Answer

$$	ext{Current Ratio} = \frac{	ext{Current Assets}}{	ext{Current Liabilities}}$$

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