Quiz Chapter 1

What is the primary purpose of accounting?

• To report to decision makers

• To summarize financial statements

• To identify economic information

• To record business activities

Which of the following is NOT a subfield of accounting?

• Marketing Accounting

• Taxation

• Management Accounting

• Financial Accounting

What does the accounting equation state?

• Assets = Liabilities + Revenue

• Assets = Liabilities + Owner's Equity

• Assets + Liabilities = Owner's Equity

• Assets = Owner's Equity - Liabilities

Which concept states that a business will continue to operate indefinitely?

• Objectivity Concept

• Accrual Concept

• Historical Cost Concept

• Going Concern Concept

What type of asset is inventory classified as?

• Current Asset

• Non-Current Asset

• Fixed Asset

• Intangible Asset

Which of the following is an example of a current liability?

• Bonds payable

• Account payable

• Mortgage

• Long-term debt

What is the effect of buying inventory on credit?

• Decrease liability and increase capital

• Increase asset and increase liability

• Decrease asset and increase liability

• Increase asset and decrease liability

What is the definition of revenue?

• Costs incurred by a business

• Financial obligations of a company

• Amounts earned from selling goods or services

• Money withdrawn by owners

Which of the following is an example of an expense?

• Electricity bill

• Cash in hand

• Accounts receivable

• Inventory

What happens when the owner withdraws cash for personal use?

• Decrease in liabilities

• Decrease in capital

• Increase in drawing

• Increase in assets