L1-Accounting equation

Which of the following statements is false?

• Liabilities are economic obligations to outsiders

• Assets are economic resources that are expected to benefit future periods

• Expenses are decreases in owner’s equity that result from delivering goods and services to customers

• Revenues are assets because they represent economic benefits.

Which of the following transactions would NOT affect owner’s equity?

• Service provided on account

• Investment of cash by the owner

• Cash purchase of supplies

• Payment of salaries

If assets decrease $8,000 during the period and liabilities decrease $40,000 during the period, owner’s equity must have:

• Decreased $32,000.

• Decreased $48,000

• Increased $32,000

• Increased $48,000

Level 2 of the hierarchy of financial-statement concepts, which describes the qualitative characteristics of accounting information, includes:

• A.   Relevance and reliability

• B.   Revenue and expenses

• C.   Comparability and understandability

• D.   Both A and C

Purchasing office furniture on account

• A.   increases assets.

• B.   has no effect on liabilities.

• C.   increases owner’s equity.

• D.   all of the above.

The amount of net income shown on the income statement also appears on the

• A.   Balance sheet.

• B.   Statement of owner’s equity.

• C.   Statement of financial position.

• D.   Cash flow statement.

       A balance sheet reports:

• A.   The assets, liabilities, and owner’s equity on a particular date.

• B.   The difference between revenues and expenses during the period.

• C.   The change in the owner’s equity during the period.

• D.   The cash receipts and cash payments during the period.

The amount owed by an entity when it makes a purchase on account is termed a(n):

• A) accounts receivable.

• B) accounts payable.

• C) note receivable.

• D) note payable.

The payment of rent each month for office space would:

• A) increase total assets.

• B) increase owner's equity.

• C) decrease liabilities.

• D) increase expenses.

Purchasing a building for $150,000 by paying cash of $30,000 and obtaining a mortgage for $120,000 would:

• A) increase assets and liabilities by $150,000.

• B) increase liabilities by $120,000.

• C) increase liabilities by $30,000.

• D) decrease assets and liabilities by $120,000.