acc1 exam1

A balance sheet lists:

• The types and amounts of the revenues and expenses of a business.

• Only the information about what happened to equity during a time period.

• The types and amounts of assets, liabilities, and equity of a business at a point in time.

• The inflows and outflows of cash during the period.

• The assets and liabilities of a company but not the owner's equity.

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

• Accounting equation.

• Measurement (Cost) principle.

• Going-concern assumption.

• Cost-benefit constraint.

• Business entity assumption.

The balance sheet shows a company's net income or loss over a period of time.

• True

• False

Objectivity means that information is supported by independent, unbiased evidence.

• True

• False

Use the following information as of December 31 to determine equity.

• $57,000.

• $141,000.

• $297,000.

• $438,000.

• $579,000.

Answer explanation

The rule that requires financial statements to assume that the business will continue operating instead of being closed or sold is the:

• Going-concern assumption.

• Business entity assumption.

• Objectivity principle.

• Measurement (Cost) principle.

• Monetary unit assumption.

Which of the following decreases equity:

• Investing activities.

• Assets.

• Accounts receivable.

• Revenues.

• Expenses.

Increases in equity from a company's sales of products or services to customers are:

• Assets.

• Revenues.

• Liabilities.

• Owner's Equity.

• Expenses.

If a company receives $12,000 from the owner to establish a proprietorship, the effect on the accounting equation would be:

• Assets decrease $12,000 and equity decreases $12,000.

• Assets increase $12,000 and liabilities decrease $12,000.

• Assets increase $12,000 and liabilities increase $12,000.

• Liabilities increase $12,000 and equity decreases $12,000.

• Assets increase $12,000 and equity increases $12,000.

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

• Assets increase $30,000; equity increases $30,000.

• Assets decrease $30,000; liabilities decrease $30,000.

• Assets decrease $30,000; liabilities increase $30,000.

• Liabilities decrease $30,000; equity increases $30,000.

• Assets decrease $30,000; equity decreases $30,000.

Answer explanation