Chapter 1 review

Profit is the difference between

• incoming cash and outgoing cash

•  the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services

• the assets purchased with cash contributed by the owner and the cash spent to operate the business

• assets and liabilities

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a

•  proprietorship

• partnership

• corporation

• governmental unit

Which of the following is an authoritative body in the United States that has the primary responsibility for developing accounting principles?

• IRS

• AICPA

• SEC

• FASB

The accounting equation may be expressed as

• Assets = Expenses − Liabilities

• Assets = Liabilities + Owner's Equity

• Assets + Liabilities = Owner's Equity

• Assets = Revenues − Liabilities

Which of the following is asset?

• capital

• accounts receivable

• revenue

• accounts payable

Cash withdrawals made by the owner for personal use

• decrease expenses

• decrease owner's equity

• increase cash

• increase expenses

Which of the following accounts is a liability?

• Accounts Receivable

• Service Revenue

• Wages Expense

• Accounts Payable

Transactions affecting owner's equity include

• earning of revenues and incurrence of expenses

• owner withdrawals, earning of revenues, incurrence of expenses, and purchase of supplies on account

• owner investments and payment of liabilities

• owner withdrawal and collection of accounts receivable

Which of the following accounts is increased when there is a purchase of supplies on account?

• Supplies

• Cash

• Accounts Payable

• Both Supplies and Accounts payable

Which of the following asset accounts is increased when a receivable is collected?

• Supplies

• Cash

• Accounts Payable

• Accounts Receivable