Accounting Quiz

Indicate whether the statement is true or false. The accounting equation can be expressed as Assets – Liabilities = Owner's Equity.

• True

• False

Indicate whether the statement is true or false. Purchasing supplies on account increases liabilities and decreases equity.

• True

• False

Indicate whether the statement is true or false. If total assets decreased by $30,000 during a specific period and owner's equity decreased by $35,000 during the same period, the period's change in total liabilities was a $65,000 increase.

• True

• False

Indicate whether the statement is true or false. An account receivable is typically classified as a revenue.

• True

• False

Indicate whether the statement is true or false. Operating activities are those activities by which a company generates revenues from customers.

• True

• False

Indicate whether the statement is true or false. Generally accepted accounting principles regulate how and what financial information is reported by businesses.

• True

• False

Prepare a balance sheet for Rocky's Day Spa for the year ended December 31.

Indicate the answer choice that best completes the statement or answers the question. Purchasing equipment for use in business operations is __________.

• an operating activity

• an investing activity

• a financing activity

• both an investing and an operating activity

Which of the following would not normally operate as a service business?

• pet groomer

• grocery store

• lawn care company

• styling salon

Which of the following groups are considered to be internal users of accounting information?

• employees and customers

• customers and vendors

• employees and managers

• government entities and banks