Question 1
Accounting provides information to __________.
A. managers
B. government
C. investors
D. All of these answers are correct.
Question 2
Which is an advantage of a sole proprietorship form of business?
A. There is limited personal risk.
B. The business can continue indefinitely.
C. The owner makes all the decisions.
D. All of these answers are correct.
Question 3
A corporation __________.
A. can continue indefinitely
B. is owned by stockholders
C. has limited risk to stockholders
D. All of these answers are correct.
Question 4
The Sarbanes-Oxley Act was passed to __________.
A. prevent fraud at public companies
B. replace all of the old accounting procedures with new ones
C. improve the accuracy of the company's financial reporting
D. Both A and C are correct.
Question 5
The purchase of supplies for cash would affect which account category?
A. assets
B. liabilities
C. capital
D. expense
Question 6
The type of business organization that can continue indefinitely is known as a __________.
A. sole proprietorship
B. partnership
C. corporation
D. None of the above answers are correct.
Question 7
Bonnie's Baskets purchases $4,000 worth of office equipment on account. This causes
A. Cash and Capital to decrease.
B. Office Equipment and Accounts Payable to increase.
C. Office Equipment to decrease and Accounts Payable to increase.
D. Accounts Payable to increase and Capital to decrease.
Question 8
Logan's Motor Sports buys $30,000 of equipment on credit. Which of the following is a true statement?
A. Total assets increase.
B. Total assets are unchanged.
C. Total liabilities decrease.
D. Total liabilities are unchanged.
Question 9
Katie's Vegetarian Restaurant, with total assets of $90,000, borrows $15,000 from the bank. Which of the following is a true statement upon borrowing the money?
A. Total assets are now $105,000.
B. Total assets are now $80,000.
C. Total assets are now $15,000.
D. Total assets are now $75,000.
Question 10
The claims of creditors against the assets are __________.
A. expenses
B. revenues
C. liabilities
D. owner's equity
Question 11
Bob purchased a new computer for the company on account. The transaction will __________.
A. increase Computer; increase Capital
B. decrease Cash; increase Accounts Payable
C. decrease Cash; increase Computer
D. increase Computer; increase Accounts Payable
Question 12
If total assets are $30,000 and total liabilities are $18,000, Capital must equal __________.
A. $12,000
B. $28,000
C. $8,000
D. $20,000
Question 13
A partnership is a business that is __________.
A. easy to form
B. ends with the death of a partner
C. owned by more than one person
D. All of these answers are correct.
Question 14
The balance sheet contains __________.
A. liabilities, expenses and capital
B. assets, liabilities and revenues
C. expenses, assets and cash
D. assets, liabilities and owner's equity
Question 15
A legal firm would be considered a __________.
A. merchandise company
B. manufacturer
C. service company
D. None of the above answers are correct.
Question 16
Which of the following is a characteristic of a sole proprietorship?
A. business owned by more than one person
B. easy to form
C. each stockholder acts as an owner of the company
D. can continue indefinitely
Question 17
If total liabilities are $1,000 and total assets are $8,000, owner's equity must be __________.
A. $7,000
B. $3,000
C. $10,000
D. $13,000
Question 18
A purchase of a vehicle for cash would have what effect on the accounting equation?
A. Total asset amount remains the same.
B. Total liabilities are overstated.
C. Total owner's equity is overstated.
D. Both A and B are correct.
Question 19
Which of the following is not a type of business organization?
A. corporation
B. partnership
C. sole proprietorship
D. operation
Question 20
Which of the following will be recorded in the owner's equity column as an increase?
A. an exchange of assets
B. the purchase of an asset on credit
C. an investment by the owner
D. a withdrawal by the owner
