Chapter 02 Accounting Flashcards
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When equipment is purchased on credit, a] assets and liabilities increase. b] assets increase and liabilities decrease. c] assets and owner's equity increase. d] assets and expenses increase.
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assets and liabilities increase.
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The statement of owner's equity is prepared before the balance sheet so that the ending capital balance is available. True False
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True
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The net income or net loss for the period is shown on both the income statement and the balance sheet. True False
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False
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Revenue is recorded when cash is collected from charge-account clients. True False
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False
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A withdrawal of funds by the owner for personal use is considered a business expense. True False
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False
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Which financial statement is a representation of the accounting equation?
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Balance Sheet
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Assets always equal debts of the business plus the financial interest of the owner. True False
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True
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An Income Statement is all of the following except a] a formal report of business operations. b] a profit and loss statement. c] a statement of revenues less withdrawals and expenses. d] a statement of income and expenses.
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a statement of revenues less withdrawals and expenses.
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Assets and liabilities are reported on a] balance sheet. b] the income statement. c] the statement of owner's equity. d] both the balance sheet and the income statement.
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balance sheet.
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When cash is collected from accounts receivable, the total amount of assets increases. True False
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False
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Withdrawals by the owner are reported on the income statement. True False
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False
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When equipment is purchased for cash, a] assets decrease and expenses increase. b] one asset increases and another asset decreases. c] assets and owner's equity increase. d] assets increase and liabilities decrease.
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one asset increases and another asset decreases.
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A business transaction is a financial event that affects the resources of a business. True False
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True
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The owner's investment or equity in a business is called cash drawing capital accounts payable
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capital
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A net loss results a] when expenses are greater than revenue. b] when assets are greater than liabilities. c] when revenue is greater than expenses. d] when expenses are greater than assets.
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when expenses are greater than revenue.
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A creditor's claim against the firm's property lasts until the debt is paid. True False
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True
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The statement of owner's equity is prepared before the balance sheet so that the ending capital balance is available. True False
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True
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Which financial statement is a representation of the accounting equation? a] Income Statement b] Statement of Owner's Equity c] Balance Sheet d] Profit and Loss Statement
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Balance Sheet
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The rent paid for future months is a(n) a] asset. b] liability. c] expense. d] revenue.
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asset.
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When cash is paid to a creditor the firms liabilities decrease
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TRUE
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If the owner takes cash out of the business for personal use, the withdrawal should be recorded as an expense of the business.
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FALSE
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The expenses for a period are reported on the balance sheet.
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False
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If there is an excess of expenses over revenues, the excess represents a profit.
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False
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The amount of net income or net loss is needed to complete the statement of owner's equity.
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True
