Accounting Ch 1 Review

What is the accounting equation?

• Liabilities - Owner's Equity = Assets

• Assets = Liabilities + Owner's Equity

• Assets = Liabilities - Owner's Equity

• Owner's Equity - Liabilities = Assets

The accounting equation does not have to be in balance to be correct.

• True

• False

When two asset accounts are changed in a transaction, there must be an increase and a decrease.

• True

• False

When items are bought and paid for at a future date, another way to state this is to say these items are bought on account.

• True

• False

A transaction for the sale of goods or services results in a decrease in owner's equity.

• True

• False

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

• True

• False

Keeping separate financial records for a business and for its owner's personal belongings is an application of Business Entity accounting concept.

• True

• False

Payments for advertising, equipment rental, cell phone bills are recorded as expenses.

• True

• False

Cash is classified as:

• Asset

• Liabilities

• Owner's Equity

Accounts Payable is classified as:

• Asset

• Liabilities

• Owner's Equity