Basic Accounting #1

They encompass the conventions, rules, and procedures necessary to define what is accepted accounting practice.

• Accounting assumptions

• Accounting concepts

• Conceptual frameworks

• General accepted accounting principles

Which of the following is the main aim of accounting?

• To maintain ledger accounts for every asset and liability.

• To provide financial information to users of such information.

• To produce a trial balance

• To record every financial transaction individually

An example of asset is:

• Machinery owned by the firm.

• Money owed by the firm to one of its suppliers for goods purchased.

• An overdrawn bank balance

• The capital of the firm.

Which of the following is the liability of a firm?

• An office building owned by the firm.

• Inventories for sale stored in the warehouse.

• Money which the firm has borrowed and has not yet been repaid.

• Money owed to the firm by its customers.

Identify the incorrect statements:

• Assets - Liabilities = Equity

• Equity - Liabilities = Assets

• Assets = Equity + Liabilities

• Assets - Equity = Liabilities

Swatch is famous for fashion wristwatches. At the end of a recent year, Swatch's total assets added up to 381 million, and the owner's equity was 264 million. How much were Swatch's liabilities?

• Cannot determined

• 381 million

• 117 million

• 264 million

Assume that Swatch sold watches to a department store on account for 50,000. How would this transaction affect Swatch's accounting equation?

• Increase both liabilities and owner's equity by 50,000

• Increase both assets and liabilities by 50,000

• Increase both assets and owner's equity by 50,000

• No effect on the accounting equation because the effects cancel out

Suppose your business has cash of 50,000, receivables of 60,000, and furniture totaling 200,000. The store owes 80,000 on account and has a 100,000 note payable. How much is your equity?

• 20,000

• 130,000

• 180,000

• 310,000

When the rent for the business is paid with a check,

• Cash is decreased and Accounts Payable is decreased.

• Cash is decreased and Rent Expense is decrease.

• Cash is decreased and Rent Expense is increased.

• Cash is increased and Rent Expense is decreased.

When an entity receives cash for services performed,

• An asset is decreased.

• The owner's equity is decreased.

• The owner's equity is increased.

• Total assets remain unchanged.