Accounting 101 - Midterm

At the end of the current year, the owner's equity in Barclay Bakery is $246,000. During the year the assets of the business had increased by $120,000, and the liabilities had increased by $72,000. Owner's equity at the beginning of the year must have been:

$198,000

If total assets equal $270,000 and total liabilities equal $202,500, the total owner's equity must equal:

$67,500

When a company uses cash to pay for an expense?

total assets will decrease, retained earnings will decrease, and owner's equity will decrease

The basic purpose of an audit is to:

Assure financial statements are in conformity with GAAP

An increase in liability is recorded by credit, an increase in owner's equity by debit.

False

The statement of financial position and income statement are one and the same.

False

When making a general journal entry, there can only be one debit and one credit

False

Owner's equity in a business decreases as a result of which?

Losses from unprofitable operation of the business

Statements may be prepared for.

One year, or less than one year

If a company purchases equipment for $70,000 cash, assets will:

Remain the same

Profitability may be defined as:

The ability to increase retained earnings

Which of the following best describes liquidity?

The ability to pay the debts of the company as they become due

The field of accounting may be best described as:

The art of interpreting, measuring, and describing economic activity

Retaining earnings appear on:

The balance sheet

Which financial statements is prepared as a specific date?

The balance sheet

A business entity is regarded as a separate from the personal activities of its owners whether it is a sole proprietorship, a partnership, or a corporation.

True

Articulation between the financial statements means that they relate closely to each other.

True

Final accounting standards issued by the FASB are considered generally accepted accounting principles.

True

One purpose of generally accepted accounting principles is to make accounting information prepared by different companies more comparable.

True

The accounting equation may be stated as "assets minus liabilities equals owner's equity".

True

The going concern principle assumes that the business will continue indefinitely.

True

The matching principle refers to the relationship between revenue and expenses.

True

The purchase of an asset such as office equipment, for cash will cause owner's equity to decrease.

True