Chapter 02 Accounting Flashcards

question

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.
answer

assets and liabilities increase.
question

The statement of owner’s equity is prepared before the balance sheet so that the ending capital balance is available. True False
answer

True
question

The net income or net loss for the period is shown on both the income statement and the balance sheet. True False
answer

False
question

Revenue is recorded when cash is collected from charge-account clients. True False
answer

False
question

A withdrawal of funds by the owner for personal use is considered a business expense. True False
answer

False
question

Which financial statement is a representation of the accounting equation?
answer

Balance Sheet
question

Assets always equal debts of the business plus the financial interest of the owner. True False
answer

True
question

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.
answer

a statement of revenues less withdrawals and expenses.
question

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.
answer

balance sheet.
question

When cash is collected from accounts receivable, the total amount of assets increases. True False
answer

False
question

Withdrawals by the owner are reported on the income statement. True False
answer

False
question

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.
answer

one asset increases and another asset decreases.
question

A business transaction is a financial event that affects the resources of a business. True False
answer

True
question

The owner’s investment or equity in a business is called cash drawing capital accounts payable
answer

capital
question

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.
answer

when expenses are greater than revenue.
question

A creditor’s claim against the firm’s property lasts until the debt is paid. True False
answer

True
question

The statement of owner’s equity is prepared before the balance sheet so that the ending capital balance is available. True False
answer

True
question

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
answer

Balance Sheet
question

The rent paid for future months is a(n) a] asset. b] liability. c] expense. d] revenue.
answer

asset.
question

When cash is paid to a creditor the firms liabilities decrease
answer

TRUE
question

If the owner takes cash out of the business for personal use, the withdrawal should be recorded as an expense of the business.
answer

FALSE
question

The expenses for a period are reported on the balance sheet.
answer

False
question

If there is an excess of expenses over revenues, the excess represents a profit.
answer

False
question

The amount of net income or net loss is needed to complete the statement of owner’s equity.
answer

True

Get instant access to
all materials

Become a Member