Moraine Park Technical College
Accounting 1 – Problem Solving Exercise 1 – Accounting Environment
1. Property that a business thinks it owns are _______.
A. owner's equity
B. liabilities
C. equities
D. assets
2. The accounting equation may be expressed as ____________.
A. Assets=Equities-Liabilities
B. Assets+Liabilities=Owner's Equity
C. Assets=Liabilities+Owner's Equity
D. Assets+Owner's Equity=Liabilities
3.
If liabilities increase $20,000 during a period of time and owner's equity increases $5,000, change in assets is
________________.
A. $20,000 increase
B. $20,000 decrease
C. $25,000 increase
D. $25,000 decrease
4. Debts owed by a business enterprise are ___________.
A. assets
B. equities
C. liabilities
D. revenue
5.
A business paid $6,000 to a creditor for an amount owed. The effect on the accounting equation is to __________.
A. increase an asset, decrease another asset
B. increase an asset, increase a liability
C. decrease an asset, decrease a liability
D. increase an asset, increase owner's equity
6. Earning revenue ____________.
A. increases assets, increases liabilities
C. increases an asset, decreases another asset
B. increases assets, increases owner's equity
D. decreases assets, increases liabilities
7. The amount charged to customers for services sold is a/an _____________.
A. expense
B. net income
C. revenue
D. asset
8. Goods purchased for future use in the business, such as supplies, are _________.
A. assets
B. revenues
C. owner's equity
D. liabilities
9. A claim against a customer for a sale made on account is a(an) _____________
A. account receivable
B. account payable
C. expense
D. prepaid expense
10. Debt created by a business when it makes a purchase on account is a(an) __________.
A. account receivable
B. account payable
C. asset
D. expense
11. The _______________ reports a summary of revenues and expenses of a business for a period of
time, such as a month or year.
A. statement of cash flow B. statement of owner's equity C. balance sheet D. income statement
12. The ____________ reports assets, liabilities, and owner's equity as of a specific date.
A. income statement B. statement of owner's equity C. statement of cash flows
D. balance sheet
13. Three financial statements are prepared for a business. The statement of owner's equity (OE), balance
sheet (B), and income statement (I) are prepared in a certain order to obtain information for the next
statement. The three statements are prepared in __________ order.
A. B, OE, I
B. B, I, OE
C. OE, I, B
D. I, OE, B
14. The matching concept requires that __________________.
A. assets match liabilities and owner's equity
B. income statement matches balance sheet
C. financial statements match
D. expenses match with revenues for the same period to determine net income
99023412
Page 1 of 1