Which of the following best describes an asset?

• A debt owed by the business
• An item of value owned by a business
• The owner's investment in the business
• An expenditure made to generate revenue

Answer explanation

Assets are defined as items that are of value and are owned by a business.

For an item to be listed as an asset on a balance sheet, which condition must it meet?

• It must be a physical object
• It must have been purchased within the last year
• The business must control or own the item
• It must generate revenue directly

Answer explanation

One of the three tests for an item to be an asset is that the business must control (own) the item.

Assets that are expected to be converted into cash within one year are known as what?

• Noncurrent assets
• Intangible assets
• Tangible assets
• Current assets

Answer explanation

Current assets are those expected to be converted into cash or other assets within a period of one year.

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

• Land and buildings
• Machinery
• Inventory or stock
• Patents and copyrights

Answer explanation

Inventory or stock, trade receivables, and bank and cash balances are examples of current assets.

Assets that are expected to be of value to the business for more than a year are categorized as:

• Current assets
• Liquid assets
• Noncurrent assets
• Owner's Equity

Answer explanation

Noncurrent assets are not expected to be converted into cash within a year and are expected to be of value for more than a year.

Land, buildings, and vehicles are all examples of which type of asset?

• Intangible assets
• Current assets
• Tangible assets
• Liabilities

Answer explanation

Tangible assets have physical substance, and common examples include land, buildings, machinery, equipment, and vehicles.

An asset that lacks physical form, such as a patent or copyright, is known as:

• A tangible asset
• A current asset
• A physical asset
• An intangible asset

Answer explanation

Intangible assets are without physical form and cannot be physically touched, such as patents and copyrights.

What is the term for the debts of a business?

• Assets
• Equity
• Revenue
• Liabilities

Answer explanation

Liabilities are the debts of a business, or what a business owes to others.

Debts and obligations that should be paid off within one year are classified as:

• Noncurrent liabilities
• Owner's Equity
• Long-term debts
• Current liabilities

Answer explanation

Current liabilities are debts and obligations that should be paid off in a period not to exceed one year.

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

• Mortgages
• Bank loans
• Accounts payable
• Owner's investment

Answer explanation

Examples of current liabilities include accounts payable, salaries payable, and utilities payable.