Final Review 3 Question Preview (ID: 19181)


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GAAP is a way to communicate financial information in a form understood by those interested in the operations and financial condition of the business.
a) True
b) False
c)
d)

Service businesses are not intended to operate at a profit.
a) True
b) False
c)
d)

After each transaction, the basic accounting equation should remain in balance.
a) True
b) False
c)
d)

A business transaction affects at least two accounts.
a) True
b) False
c)
d)

Assets + Liabilities = Owner's Equity is another way to express the basic accounting equation.
a) True
b) False
c)
d)

All of the following account titles are asset titles except ____.
a) Office Furniture
b) Accounts Payable
c) Cash in Bank
d) Equipment

A business transaction that involves a purchase on account is considered to be a(n) ____.
a) cash transaction
b) credit transaction
c) expense transaction
d) investment transaction

Each of the following is a business expense except a payment for ____.
a) advertising
b) utility bills
c) monthly rent
d) equipment

The purchase of a desk on account will increase Office Furniture and will also increase ____.
a) cash in bank
b) accounts receivable
c) accounts payable
d) Marie Krabish, Capital

The word equities refers to claims against the assets of a business by ____.
a) both creditors and owners
b) owners only
c) creditors only
d) customers only

The increases and decreases caused by business transactions are recorded in specific accounts.
a) True
b) False
c)
d)

The free enterprise system is based on the right to own property.
a) True
b) False
c)
d)

One of the purposes of accounting is to provide financial information about property and the rights to that property.
a) True
b) False
c)
d)

The owner's claims to the assets of a business are liabilities.
a) True
b) False
c)
d)

A creditor has a financial claim to the assets of a business.
a) True
b) False
c)
d)

An account is a record of only the increases in the balance of a specific item such as cash or equipment.
a) True
b) False
c)
d)

The total financial claims do not have to equal the total cost of the property.
a) True
b) False
c)
d)

The top of the T account is used for account titles. Credits are entered on the left side of the T; debits, on the right.
a) True
b) False
c)
d)

A credit to an account always increases it; a debit to an account always decreases it.
a) True
b) False
c)
d)

An asset account appears on the right side of the accounting equation and is also increased on the right side of its T account.
a) True
b) False
c)
d)

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