FBLA Accounting 2005

The capital account is an owner's equity account.

• True

• False

Answer explanation

The correct answer is True because the capital account represents the owner's equity in the business.

If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance.

• True

• False

Answer explanation

The correct answer is True because if two amounts are recorded on the same side of the accounting equation, it will no longer be in balance.

A business that performs an activity for a fee is a service business.

• True

• False

Answer explanation

The correct choice is True because a service business provides services in exchange for a fee, distinguishing it from other types of businesses.

A proprietorship is also known as a sole proprietorship.

• True

• False

Answer explanation

The statement is true because a proprietorship and a sole proprietorship refer to the same type of business structure where one individual owns and operates the business.

A business has two types of equities.

• True

• False

Answer explanation

The correct answer is true because a business can have two types of equities, such as common stock and preferred stock.

When an owner withdraws cash from the business, the transaction affects both assets and owner's equity.

• True

• False

Answer explanation

The statement is true because when an owner withdraws cash, it reduces the assets (cash) and owner's equity in the business.

When cash is paid to the owner for personal use, assets decrease and owner's equity decreases.

• True

• False

Answer explanation

When cash is paid to the owner for personal use, assets decrease as cash is an asset, and owner's equity decreases since the owner is withdrawing funds for personal use. Therefore, the statement is true.

The right side of a balance sheet presents liabilities and assets.

• True

• False

Answer explanation

The statement is true because the right side of a balance sheet typically presents liabilities and assets, making it an accurate representation.

Sandra Stern, Drawing is increased with a credit.

• True

• False

Answer explanation

The statement indicates that Sandra Stern's drawing is increased with a credit, which makes the answer True.

The source document for cash payments is a check.

• True

• False

Answer explanation

The correct answer is True because the source document for cash payments is typically a check.