Question 1

The economic resources of a business such as furniture, building, and land are its:

Accepted Answer

A) liabilities. 
B) revenues. 
C) assets. 
D) withdrawals. 
A) liabilities. 
B) revenues. 
C) assets. 
D) withdrawals.

Question 2

Local, state, and federal governments use accounting information to calculate income tax.

Accepted Answer

A) True 
 B)False

Question 3

Lush Lawns incurred $1,500 labor expense and promised to pay the labor agency within 30 days. Which of the following would decrease as a result of this transaction?

Accepted Answer

A) Assets 
B) Owner's Capital 
C) Liabilities 
D) Revenues 
A) Assets 
B) Owner's Capital 
C) Liabilities 
D) Revenues

Question 4

Scott's Camera Shop started the year with total assets of $80,000 and total liabilities of $40,000. During the year, the business earned revenues of $120,000 and incurred expenses of $70,000. Scott made no additional capital contributions during the year, but did make withdrawals of $60,000. What is the amount of owner's equity at the end of the year?

Accepted Answer

A) $70,000 
B) $120,000 
C) $30,000 
D) $60,000 
A) $70,000 
B) $120,000 
C) $30,000 
D) $60,000

Question 5

Gunnie Inc., located in Texas, records business transactions in dollars and disregards changes in the value of a dollar over time. Which of the following accounting assumptions does this represent?

Accepted Answer

A) economic entity assumption 
B) going concern assumption 
C) accounting period assumption 
D) monetary unit assumption 
A) economic entity assumption 
B) going concern assumption 
C) accounting period assumption 
D) monetary unit assumption

Question 6

The net income of a business is $29,000. The beginning and ending capital balances were $34,000 and $55,000, respectively. No capital contributions were made by the owner during the year. Calculate the amount of owner's withdrawals.

Accepted Answer

A) $18,000 
B) $8,000 
C) $5,000 
D) $60,000 
A) $18,000 
B) $8,000 
C) $5,000 
D) $60,000

Question 7

IFRS is the main U.S. accounting rule book and is currently created and governed by the FASB.

Accepted Answer

A) True 
 B)False

Question 8

The left side of the accounting equation measures the amount that the business owes to creditors and to the owner.

Accepted Answer

A) True 
 B)False

Question 9

Sharon Samson starts a plumbing service named Reliable Waterworks. Selected transactions are described as follows:
A. Sharon deposited $8,000 into a new checking account for the business and recorded the capital contribution.
B. Paid $5,000 cash for equipment to be used for plumbing repairs.
C. Borrowed $10,000 from a local bank and deposited the money in the checking account.
D. Paid $800 rent for the year.
E. Paid $300 cash for plumbing supplies to be used in future.
F. Completed a plumbing repair project for a local lawyer and received $4,000 cash.
Calculate the net income.

Accepted Answer

A)  $2,900 
B)  $3,700 
C)  $4,000 
D)  $3,200 
A)  $2,900 
B)  $3,700 
C)  $4,000 
D)  $3,200

Question 10

Martin Supply Service paid $350 cash to a materials supplier that it owed from the previous month. Which of the following accounts decreases?

Accepted Answer

A) Accounts Receivable 
B) Accounts Payable 
C) Owner's Capital 
D) Office Supplies 
A) Accounts Receivable 
B) Accounts Payable 
C) Owner's Capital 
D) Office Supplies

Question 11

A business collects $5,000 from its customer which was owed since a previous month. How does this affect the accounting equation of the business?

Accepted Answer

A) Assets increase by $5,000; liabilities decrease by $5,000. 
B) Assets increase by $5,000; assets decrease by $5,000. 
C) Assets increase by $5,000; liabilities increase by $5,000. 
D) Assets increase by $5,000; equity increases by $5,000. 
A) Assets increase by $5,000; liabilities decrease by $5,000. 
B) Assets increase by $5,000; assets decrease by $5,000. 
C) Assets increase by $5,000; liabilities increase by $5,000. 
D) Assets increase by $5,000; equity increases by $5,000.

Question 12

Which of the following will be categorized as a financing activity on the statement of cash flows?

Accepted Answer

A) cash received by selling old equipment 
B) cash paid for purchase of new machinery 
C) cash paid for purchase of raw materials 
D) cash received from issue of shares 
A) cash received by selling old equipment 
B) cash paid for purchase of new machinery 
C) cash paid for purchase of raw materials 
D) cash received from issue of shares

Question 13

The statement of owner's equity shows the changes in Owner's capital. Which one of these statements is true?

Accepted Answer

A) Decreases in Owner's equity result from additional owner investments. 
B) Decreases in Owner's equity result from net losses. 
C) Decreases in Owner's equity result from net income. 
D) Decreases in Owner's equity result from revenues earned. 
A) Decreases in Owner's equity result from additional owner investments. 
B) Decreases in Owner's equity result from net losses. 
C) Decreases in Owner's equity result from net income. 
D) Decreases in Owner's equity result from revenues earned.

Question 14

Star Homes Inc. just recorded a transaction in its books of accounts. If this transaction increased the total liabilities by $7,000:

Accepted Answer

A) assets must increase, or equity must decrease by $7,000. 
B) assets or equity must decrease by $7,000. 
C) both assets and equity must each decrease by $3,500. 
D) assets must decrease by $7,000. 
A) assets must increase, or equity must decrease by $7,000. 
B) assets or equity must decrease by $7,000. 
C) both assets and equity must each decrease by $3,500. 
D) assets must decrease by $7,000.

Question 15

A business owner starts a new business and invests $6,000 of capital. This transaction results in an increase in the assets of the business.

Accepted Answer

A) True 
 B)False

Question 16

GAAP are the rules that govern accounting in the United States. The acronym GAAP in this statement refers to:

Accepted Answer

A) Globally Accepted and Accurate Policies. 
B) Global Accommodation Accounting Principles. 
C) Generally Accredited Accounting Policies. 
D) Generally Accepted Accounting Principles. 
A) Globally Accepted and Accurate Policies. 
B) Global Accommodation Accounting Principles. 
C) Generally Accredited Accounting Policies. 
D) Generally Accepted Accounting Principles.

Question 17

A business receives a bill from one of its suppliers for services received. The business will pay the supplier next month. How does the receipt of the bill from the supplier affect the accounting equation of the business?

Accepted Answer

A) Assets decrease; equity decrease. 
B) Liabilities increase; equity decrease. 
C) Assets increase; liabilities increase. 
D) Liabilities increase; equity increase. 
A) Assets decrease; equity decrease. 
B) Liabilities increase; equity decrease. 
C) Assets increase; liabilities increase. 
D) Liabilities increase; equity increase.

Question 18

Lush Lawns performs lawn mowing services for its customers. The payments for the current month's services are expected to be received next month. How does this transaction affect the accounting equation of Lush Lawn?

Accepted Answer

A) Liabilities increase; equity decreases. 
B) Assets increase; equity increases. 
C) Assets decrease; equity decreases. 
D) Liabilities increase; equity increases. 
A) Liabilities increase; equity decreases. 
B) Assets increase; equity increases. 
C) Assets decrease; equity decreases. 
D) Liabilities increase; equity increases.

Question 19

The Public Company Accounting Oversight Board (PCAOB)was created by the:

Accepted Answer

A) Sarbanes-Oxley Act (SOX) 
B) International Accounting Standards Board (IAS
B)  
C) Institute of Management Accountants (IM
A)  
D) American Institute of Certified Public Accountants (AICP
A)  
A) Sarbanes-Oxley Act (SOX) 
B) International Accounting Standards Board (IAS
B)  
C) Institute of Management Accountants (IM
A)  
D) American Institute of Certified Public Accountants (AICP
A)

Question 20

Members of a limited-liability company (LLC)are not personally liable for the debts of the business.

Accepted Answer

A) True 
 B)False

Exam 1: Accounting and the Business Environment

The economic resources of a business such as furniture, building, and land are its:

Local, state, and federal governments use accounting information to calculate income tax.

Lush Lawns incurred $1,500 labor expense and promised to pay the labor agency within 30 days. Which of the following would decrease as a result of this transaction?

Gunnie Inc., located in Texas, records business transactions in dollars and disregards changes in the value of a dollar over time. Which of the following accounting assumptions does this represent?

The net income of a business is $29,000. The beginning and ending capital balances were $34,000 and $55,000, respectively. No capital contributions were made by the owner during the year. Calculate the amount of owner's withdrawals.

IFRS is the main U.S. accounting rule book and is currently created and governed by the FASB.

The left side of the accounting equation measures the amount that the business owes to creditors and to the owner.

Martin Supply Service paid $350 cash to a materials supplier that it owed from the previous month. Which of the following accounts decreases?

A business collects $5,000 from its customer which was owed since a previous month. How does this affect the accounting equation of the business?

Which of the following will be categorized as a financing activity on the statement of cash flows?

The statement of owner's equity shows the changes in Owner's capital. Which one of these statements is true?

Star Homes Inc. just recorded a transaction in its books of accounts. If this transaction increased the total liabilities by $7,000:

A business owner starts a new business and invests $6,000 of capital. This transaction results in an increase in the assets of the business.

GAAP are the rules that govern accounting in the United States. The acronym GAAP in this statement refers to:

A business receives a bill from one of its suppliers for services received. The business will pay the supplier next month. How does the receipt of the bill from the supplier affect the accounting equation of the business?

Lush Lawns performs lawn mowing services for its customers. The payments for the current month's services are expected to be received next month. How does this transaction affect the accounting equation of Lush Lawn?

The Public Company Accounting Oversight Board (PCAOB)was created by the:

Members of a limited-liability company (LLC)are not personally liable for the debts of the business.

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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