Multiple Choice Answers

1. If ‘Ol Fashioned toys’ revenues are less than its expenses during the accounting period, then.
a. owner’s withdrawals decrease net income
b. net income causes liabilities to decrease
c. the business will incur a loss
c. owner’s withdrawals increase owner’s equity

2. The statement of owner’s equity contains the
a. owner’s capital for the beginning of the period
b. liabilities of the company
c. total amount owed by credit customers
d. balance in the cash account

3. Ryan withdrew cash from the business to pay his personal cell ophone bill. The expanded accounting equation changes include
a. increase in both cash and withdrawal
b. decrease in both cash and withdrawal
c. decrease in cash and increase in withdrawal
d. increase in cash and decrease in withdrawal

4. a company has $4,500 in its Revenue account at the end of a period. The Expenses are as follows: Rent, $750; Utilities, $150; Salaries, $2,400; Insurance, $225. The net income (loss for the period is
a. $3,600
b. ($2,100
c. $975
d. ($1,425

5. An expense should be recorded when
a. the bill is paid
b. the expense is incurred
c. a bill is rreceived in the mail.
d. None of the above answers are correct.

6. The increase or decrease in the owner’s equity is reported on the
a. income statement
b. statement of owner’s equity
c. balance sheet
d. all of these answers are correct

7. Expense
a. are costs the company incurs in carrying on operations
b. are a subdivision of owner’s equity
c. record personal expenses not related to the business
d. both A and B are correct

8. Which of the following is included in the balance sheet?
a. revenue
b. salaries expense
c. utilities expense
d. accounts payable

9. Which financial statement is considered a link between the income statement and balance sheet?
a. statement of cash flows
b. statement of company assets
c. statement of company liquidity
d. statement of owner’s equity

10. Which of the following transactions has no effect on owner’s equity?
a. paying salaries expense
b. equipment purchase
c. billing for services rendered
d. a withdrawal

11. Carrie billed her legal clients $6,000 for legal work completed during the month. This transaction will
a. cause a $6,000 increase in revenues and liabilities
b. cause a $6,000 increase in revenues and a decrease in liabilities
c. cause a $6,000 increase in assets and revenues
d. not be recorded until the cash is collected

12. An accounting report that shows the changes in capital during the accounting period is
a. a balance sheet
b. an income statement
c. a statement of owner’s equity
d. all of these ansers are correct

13. The financial statement that shows revenue and expenses for a period of time is the
a. balance sheet
b. income statement
c. statement of owner’s equity
d. statement of cash flows

14. Which of the following is not one of the four basic financial statements?
a. statement of cash flows
b. income statement
c. statement of company position
d. balance sheet

15. When services are rendered but payment is not made, which account would be increased?
a. accounts receivable
b. accounts payable
c. cash
d. withdrawal

16. The net income or net loss is calculated on the
a. balance sheet
b. statement of owner’s equity
c. income statement
d. none of the above answers are correct

17. Which accounts are affected when the company buys supplies on account?
a. assets and capital
b. liabilities and capital
c. assets and liabilities
d. none of the above answers are correct

18. If beginning capital was $110,000, ending capital is $95,000, and the owner’s withdrawals were $10,000, the amount of net income or net loss was
a. net income of $5,000
b. net income of $15,000
c. net loss of $15,000
d. net loss of $5,000

19. Which of the following items are on both the balance sheet and the statement of owner’s equity?
a. net loss
b. capital
c. additional owner’s investment
d. owner’s withdrawals