Question 1

If total liabilities are $18,000 and owner's equity is $21,000, the total assets must be __________.

A. $39,000

B. $5,000

C. $20,000

D. $17,000

Question 2

Which of the following is a characteristic of a sole proprietorship?

A. business owned by more than one person

B. easy to form

C. each stockholder acts as an owner of the company

D. can continue indefinitely

Question 3

Which of the following transactions would cause one asset to increase and another asset to decrease?

A. The owner invested cash in the business.

B. The business paid a creditor.

C. The business incurred an expense on credit.

D. The business bought supplies for cash.

Question 4

Mary invested cash in her new business. What effect will this have?

A. increase an asset and increase a liability

B. decrease an asset and increase a liability

C. increase an asset and increase owner's equity

D. increase an asset and decrease owner's equity

Question 5

Which of the following will be recorded in the owner's equity column as an increase?

A. an exchange of assets

B. the purchase of an asset on credit

C. an investment by the owner

D. a withdrawal by the owner

Question 6

The purpose of the accounting process is to provide financial information about __________.

A. sole proprietorships

B. small businesses

C. large corporations

D. All of these answers are correct.

Question 7

The balance sheet contains __________.

A. liabilities, expenses and capital

B. assets, liabilities and revenues

C. expenses, assets and cash

D. assets, liabilities and owner's equity

Question 8

The purchase of supplies for cash would affect which account category?

A. assets

B. liabilities

C. capital

D. expense

Question 9

A partnership is a business that is __________.

A. easy to form

B. ends with the death of a partner

C. owned by more than one person

D. All of these answers are correct.

Question 10

Bonnie's Baskets purchases $4,000 worth of office equipment on account. This causes

A. Cash and Capital to decrease.

B. Office Equipment and Accounts Payable to increase.

C. Office Equipment to decrease and Accounts Payable to increase.

D. Accounts Payable to increase and Capital to decrease.

Question 11

A corporation __________.

A. can continue indefinitely

B. is owned by stockholders

C. has limited risk to stockholders

D. All of these answers are correct.

Question 12

The type of business organization that can continue indefinitely is known as a __________.

A. sole proprietorship

B. partnership

C. corporation

D. None of the above answers are correct.

Question 13

Which of the following would result if the business purchased supplies on credit?

A. Supplies would increase and Cash would decrease.

B. Supplies would increase and Capital would increase.

C. Supplies would increase and Accounts Payable would increase.

D. The purchase of supplies is not a business transaction.

Question 14

If total liabilities are $1,000 and total assets are $8,000, owner's equity must be __________.

A. $7,000

B. $3,000

C. $10,000

D. $13,000

Question 15

Katie's Vegetarian Restaurant, with total assets of $90,000, borrows $15,000 from the bank. Which of the following is a true statement upon borrowing the money?

A. Total assets are now $105,000.

B. Total assets are now $80,000.

C. Total assets are now $15,000.

D. Total assets are now $75,000.

Question 16

If total assets are $30,000 and total liabilities are $18,000, Capital must equal __________.

A. $12,000

B. $28,000

C. $8,000

D. $20,000

Question 17

How does the purchase of office equipment on account affect the accounting equation?

A. assets increase; liabilities decrease

B. assets increase; owner's equity increases

C. assets increase; liabilities increase

D. liabilities increase; owner's equity decreases

Question 18

Accounting provides information to __________.

A. managers

B. government

C. investors

D. All of these answers are correct.

Question 19

Assets are equal to __________.

A. liabilities + owner's equity

B. liabilities - owner's equity

C. liabilities - revenues

D. revenues - expenses

Question 20

Strum Hardware has total assets of $50,000. What are the total assets if new equipment is purchased for $10,000 cash?

A. $45,000

B. $50,000

C. $55,000

D. $60,000