Accounting Equation practice questions

Question: Which of the following statements is NOT true?

Answer Choices:
The owner’s equity is increased by amounts invested by the owner and is decreased by withdrawals by the owner.
A business owner’s personal assets are considered part of owner’s equity.
The effect of every transaction is an increase or a decrease in one or more of the accounting equation elements.
The two sides of the accounting equation are always equal.

Answer: A business owner’s personal assets are considered part of owner’s equity.

Question: The principles and concepts that the management of a company uses to record and report its financial information are called _____.

Answer Choices:
FASB
GAAP
AICPA
SEC

Answer: GAAP

Question: Assets and owner’s equity of a company are $200,000 and $40,000, respectively. Determine liabilities.

Answer Choices:
$240,000
$200,000
$40,000
$160,000

Answer: $160,000

Question: “The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for developing accounting principles.”

Answer Choices:
True
False

Answer: True

Question: “Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.”

Answer Choices:
True
False

Answer: False

Question: “There are four primary financial statements of a proprietorship: the income statement, the statement of owner’s equity, the balance sheet, and the statement of cash flows.”

Answer Choices:
True
False

Answer: True

Question: Money earned by a business for selling goods or services to its customers represents _____.

Answer Choices:
Assets
Liabilities
Revenues
Expenses

Answer: Revenues

Question: Owner’s equity is the right of owners to the assets of the business. These rights are _ by owner’s investments and revenues and _ by owner’s withdrawals and expenses.

Answer Choices:
Increased; increased
Increased; decreased
Decreased; decreased
Decreased; increased

Answer: Increased; decreased

Question: Accounting principles within the United States are primarily developed by _____.

Answer Choices:
GAAP
The SEC
The FASB
The IASB

Answer: The FASB

Question: The statement that provides the financial position of a company as of a specific date is the _____.

Answer Choices:
Balance sheet
Statement of cash flows
Income statement
Statement of owner’s equity

Answer: Balance sheet

Question: At what value will Harvey Company record the equipment on the books after agreeing to purchase it for $14,800?

Answer Choices:
$23,200
$14,800
$19,300
$13,100

Answer: $14,800

Question: Given the following information, determine the amount of cash on the balance sheet, assuming that the company has only three assets. Liabilities equal $3,250; owner’s equity equals $30,000; supplies equal $2,000; and land equals $24,500.

Answer Choices:
$10,750
$6,750
$250
None of these choices are correct

Answer: $6,750

Question: Owner’s equity can best be defined as the rights of _____.

Answer Choices:
Creditors
Owners
Either owners or creditors
Both owners and creditors

Answer: Owners

Question: Which of the following statements provides a summary of cash receipts and payments for a specific period?

Answer Choices:
Income statement
Balance sheet
Statement of cash flows
Statement of owner’s equity

Answer: Statement of cash flows

Question: Liabilities are _____.

Answer Choices:
The rights of owners
The rights of creditors
The rights of customers
None of these choices are correct

Answer: The rights of creditors

Question: “Generally accepted accounting principles regulate how and what financial information is reported by businesses.”

Answer Choices:
True
False

Answer: True

Question: Cool Taste Company recorded $5,400 in sales on account for the week. What effect does this transaction have on the accounting equation?

Answer Choices:
No effect on the accounting equation.
$5,400 increase in assets and $5,400 increase in owner’s equity
$5,400 increase in assets and $5,400 increase in liabilities
$5,400 increase in assets and $5,400 decrease in owner’s equity

Answer: $5,400 increase in assets and $5,400 increase in owner’s equity

Question: “No significant differences exist between the accounting standards issued by the FASB and the IASB.”

Answer Choices:
True
False

Answer: False

Accounting Equation practice questions

Question: Which of the following statements is NOT true?

Question: The principles and concepts that the management of a company uses to record and report its financial information are called _____.

Question: Assets and owner’s equity of a company are $200,000 and $40,000, respectively. Determine liabilities.

Question: “The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for developing accounting principles.”

Question: “Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.”

Question: “There are four primary financial statements of a proprietorship: the income statement, the statement of owner’s equity, the balance sheet, and the statement of cash flows.”

Question: Money earned by a business for selling goods or services to its customers represents _____.

Question: Owner’s equity is the right of owners to the assets of the business. These rights are _____ by owner’s investments and revenues and _____ by owner’s withdrawals and expenses.

Question: Accounting principles within the United States are primarily developed by _____.

Question: The statement that provides the financial position of a company as of a specific date is the _____.

Question: At what value will Harvey Company record the equipment on the books after agreeing to purchase it for $14,800?

Question: Given the following information, determine the amount of cash on the balance sheet, assuming that the company has only three assets. Liabilities equal $3,250; owner’s equity equals $30,000; supplies equal $2,000; and land equals $24,500.

Question: Owner’s equity can best be defined as the rights of _____.

Question: Which of the following statements provides a summary of cash receipts and payments for a specific period?

Question: Liabilities are _____.

Question: “Generally accepted accounting principles regulate how and what financial information is reported by businesses.”

Question: Cool Taste Company recorded $5,400 in sales on account for the week. What effect does this transaction have on the accounting equation?

Question: “No significant differences exist between the accounting standards issued by the FASB and the IASB.”

Question: Owner’s equity is the right of owners to the assets of the business. These rights are _ by owner’s investments and revenues and _ by owner’s withdrawals and expenses.