1. Which of the following will cause owner's equity to increase? A. Expenses B. Owner s drawings D. loss 2. XYZ Co. provided the following information about its balance sheet: Cash K.D. 1,000 Account receivable 5,000 Stockholder s equity 2,500 Account payable 1,500 Bank loans 2,000 Based on the information provided, how much are XYZ Co.'s assets? A. K.D. 1,000 B. K.D. 2,500 C. K.D. 6,000 D. K.D. 5,000 3. Based on the information provided on Question 2, how much are XYZ Co.'s liabilities? A. K.D. 2,500 B. K.D. 2,000 C. K.D. 1,500 D. K.D. 3,500 Lecture 4 Page 1
4. Which of the following will cause owner's equity to decrease? A. Net income B. Sales D. Net loss 5. Resources owned by a company (such as cash, accounts receivable, trucks) are reported on the balance sheet and are referred to as: A. Liabilities B. Stockholder s equity D. Assets 6. A trial balance: A. Proves that entries have been recorded correctly B. Verifies whether debits equal credits and that the accounting system is in balance C. Should only be done once per accounting period D. Is prepared with debits in the right column and credits in the left column 7. Obligations (amounts owed) are reported on the balance sheet and are referred to as A. Expenses B. Stockholder s equity D. Liabilities Lecture 4 Page 2
8. Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements? A. Historical cost principle B. Monetary unit assumption C. Economic entity assumption D. Full disclosure principle 9. In a double-entry system, debits must equal : A. Debits B. Debits or credit C. Credits D. None of the above 10. Performing services on account will have the following effects on the components of the basic accounting equation: A. Increase assets and decrease owner s equity B. Increase assets and increase owner s equity C. Increase assets and increase liabilities D. Increase liabilities and increase owner s equity 11. The trial balance: A. Shows whether the total of all debits equals the total of all credits. B. Confirms that the transaction records are free from error. C. Is used to identify and correct transactions recorded in the wrong accounts. D. Is prepared to determine whether an account has an abnormal balance. Lecture 4 Page 3
12. Assets are usually reported on the balance sheet at which amount? A. Current market value B. Expected selling price C. Cost D. Future market value 13. In a journal entry: A. Credits exceed debits for an expense transaction B. Credits exceed debits for a cash transaction C. Debits equal credits D. Debits exceed credits in a revenue transaction 14. Accounting entries involve a minimum of how many accounts? A. One B. Two C. Three D. Four 15. Assets minus liabilities equals: A. Expenses B. Stockholder s equity D. Cash Lecture 4 Page 4
16. Debits increase : A. Asset accounts B. Liability accounts C. Revenue accounts D. Owner s equity accounts 17. Which of the following events is not recorded in the accounting records? A. Equipment is purchased on account B. An employee is terminated C. A cash investment is made into the business D. The owner withdraws cash for personal use 18. Credits are used to record increases in: A. Assets, revenues, liabilities, and owner's capital B. Expenses, liabilities, and owner's capital, owner's drawings, and assets D. Revenues, liabilities, and owner's capital 19. Which of the following accounts is increased by credits? A. Cash B. Supplies C. Prepaid Rent D. Accounts Payable Lecture 4 Page 5
20. In a double-entry system, credits must equal : A. Debits B. Debits or credit C. Credits D. None of the above 21. Credits decrease : A. Asset accounts B. Liability accounts C. Revenue accounts D. Owner s equity accounts 22. Revenue accounts normally have: A. Debit balances B. Credit balances C. No balance D. None of the above 23. The process of transferring a journal entry to the ledger is called: A. Recording B. Posting C. Journalizing D. Writing Lecture 4 Page 6