Ch 1 Changes that Affect the Accounting Equation REVIEW

Detailed information about changes in owner's equity is needed by owners and managers to make sound business decisions.

• true

• false

An expense is a decrease in owner's equity resulting from the operation of a business.

• true

• false

The standards and rules that accountants follow while recording and reporting financial activities.

• accounting concepts

• GAAP

• GAP

• accounting general principles

Anything of value that is owned is called a(n) _________________.

Payments for advertising, equipment repairs, utilities, and rent are liabilities.

• true

• false

When an owner withdraws cash from the business, the transaction affects both assets and owner's equity.

• true

• false

Paying cash for a telephone bill will increase or decrease capital.

• increase

• decrease

Gusto Music received cash in the amount of $600.00 from sales. Capital and _________ would both increase.

• cash

• accounts receivable

• accounts payable

• capital

A negative amount for net worth would reflect more debt than assets, something a creditor would favor.

• true

• false

Total assets are the amount the owner has invested in the business.

• true

• false