Accounting 1: Chapter 2

When we receive revenue our owner's equity, capital account:

• Decreases

• Increases

• Stays the same

• Isn't affected

When we make a sale on account, we are using:

• Owner's Equity, Drawing

• Accounts Payable

• Supplies

• Accounts Receivable

All expense transactions affect cash and owner's equity, capital in what way?

• Decrease to both accounts

• Increase to both accounts

• Increase cash, decrease owner's equity, capital

• Decrease cash, increase owner's equity, capital

Owner withdrawals from the business are considered an:

• Asset

• Liability

• Expense

An established business should rarely experience a decrease in:

• Cash

• Expenses

• Owner's Equity

• Liabilities

If cash is paid for advertising:

• Two assets are changed

• An asset and a liability are changed

• An asset and owner's equity are changed

• Two liabilities are changed

A balance sheet is used for:

• External purposes

• Outward purposes

• Accounting department only

• Internal purposes

The accounting equation has to be in balance after every transaction?

• True

• False

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

• True

• False

A withdrawal is an expense.

• True

• False