CH. 1 THE ACCOUNTING EQUATION

T/F: Payments for advertising, equipment repairs, utilities and rent are liabilities.

• True

• False

T/F: When an owner withdraws cash from the business, the transaction affects both assets and owner's equity.

• True

• False

T/F: A negative amount of net worth would reflect more debt than assets, something a creditor would favor.

• True

• False

Anything you own in your company:

• Asset

• Liability

• Owner's Equity

• Capital

The two important financial statements are:

• Income Statement and Net Worth Statement

• Balance Sheet and Accounting Equation

• Income Statement and Balance Sheet

• Income Statement and Worksheet

T/F: The most common type of withdrawal by an owner from a business is a withdrawal of cash.

• True

• False

After each transaction the accounting equation must remain balanced.

• True

• False

T/F: A transaction for the sale of goods or services results in a decrease in owner's equity.

• True

• False

The accounting equation is most often stated Assets + Liabilities = Owner's Equity.

• True

• False

T/F: An expense is a decrease in owner's equity resulting from the operation of a business.

• True

• False