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
