Accounting Exam 1
Which of the following statements is the correct definition of a liability?
A liability is a claim by a creditor against the assets of a business
- Notes receivable is considered a(n) _____
o Asset
- Equipment is a(n) _____ account. It is reported on the _____ side of the accounting equation and is _____ when equipment is purchased
o Asset o Left o Increased
- Prepaid accounts are _____ that represent payments of future expenses and are increased with a _____
o Assets o Debit
- Supplies are _____ until they are used. When they are used up, their costs are reported as _____
o Assets o Expenses
- Match the item on the left with the correct definition on the right
o Creditors - individuals or organizations that have rights to receive payments from a business o Liabilities - claims against the assets of a business o Assets - things of value owned by a business o Expenses - the costs of doing business
- Which of the following statements is (are) accurate regarding equipment purchased within a business?
o Equipment purchases are reported on the balance sheet o Equipment is an asset o Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed o Equipment is reported on the left side of the accounting equation
- True or false: The cost of land owned by a business is recorded in the Land account and this account is classified as an expense
o FALSE
Select the statement below that best defines prepaid accounts
o Prepaid accounts are assets that represent prepayments of future expenses
Which of the following statements is accurate about the Land account?
o The Land account is an asset o The Land account is used to record the costs of land purchased by the business o The Land account is increased on the left side of its T-account
Which of the following statements are accurate regarding supplies?
o Unused supplies are treated as assets o Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies o Supplies are assets until they are used o When supplies are purchased, they are added to the supplies account
