You Science Review #4

A business prepares a balance sheet to report information about

• expenses incurred during a given period of time

• revenue received during a given period of time

• the business's assets, liabilities, and owner's equity

• profit the business has made for the year

Answer explanation

A balance sheet reports a business's assets, liabilities, and owner's equity. It provides a snapshot of the financial position of the business.

If a business paid cash for repairs to equipment, this would

• increase owner's equity

• increase liabilities

• decrease owner's equity

• decrease liabilities

Answer explanation

Paying cash for repairs to equipment decreases owner's equity. Repairs is an expense. Expenses decrease the owners equity account. Remember Sales will increase the owners equity account

When cash is received from sales

• assets increase; owner's equity decreases

• assets increase; owner's equity increases

• assets decrease; owner's equity decreases

• none of the above

Answer explanation

When cash is received from sales, assets increase and owner's equity increases.

When the owner withdraws cash for personal use

• liabilities increase and assets decrease

• assets decrease and owner's equity increases

• assets decrease and owner's equity decreases

• liabilities decrease and assets decrease

Answer explanation

When the owner withdraws cash for personal use, assets decrease and owner's equity decreases.

The right side of a T account is the

• debit side

• credit side

• normal balance side

• equity side

Answer explanation

The right side of a T account is the credit side, which is the correct choice.

When the owner withdraws cash, the owner's drawing account is

• increased by a debit

• increased by a credit

• decreased by a debit

• decreased by a credit

Answer explanation

When the owner withdraws cash, the owner's drawing account is increased by a debit. This choice correctly explains that the drawing account is increased, not decreased, and that a debit entry is made.

An amount recorded on the left side of a T account is

• debit

• credit

• normal balance

• none of the above

Answer explanation

The amount recorded on the left side of a T account is called a debit, which is the correct choice.

A sale on account

• increases an owner's equity account and increases an asset account

• increases a liability account and increases an asset account

• increases an owner's equity account and increases a liability account

• increases an owner's equity account and decreases a liability account

Answer explanation

A sale on account increases an owner's equity account and increases an asset account. This choice is correct because it accurately describes the impact of a sale on account.

The recording of debit and credit parts of a transaction is

• double-entry accounting

• single-entry accounting

• accounting

• none of the above

Answer explanation

The recording of debit and credit parts of a transaction is done using double-entry accounting, where both sides of the transaction are recorded to maintain balance and accuracy.

The entry to record receipt of cash from the owner as an investment is

• debit Capital, credit Cash

• debit Cash, credit Capital

• debit Cash, credit Accounts Payable

• none of the above

Answer explanation

To record receipt of cash from the owner as an investment, debit Cash and credit Capital. This choice correctly reflects the transaction.