Basic Accounting – Multiple Choice Questions

What is the accounting equation?

• Assets = Liabilities − Equity

• Assets = Liabilities + Equity

• Assets + Liabilities = Equity

• Assets = Revenue − Expenses

Which financial statement shows a company’s financial position at a specific point in time?

• Income Statement

• Statement of Cash Flows

• Balance Sheet

• Owner’s Equity Statement

Revenue is recorded when:

• Cash is received

• A sale is made

• Bills are paid

• Expenses are incurred

Which of the following is an asset?

• Accounts Payable

• Cash

• Capital

• Service Revenue

Which account increases with a debit?

• Revenue

• Liability

• Expense

• Capital

Accounts Payable is classified as:

• Asset

• Liability

• Equity

• Income

Which statement shows a company’s profit or loss?

• Balance Sheet

• Income Statement

• Cash Flow Statement

• Trial Balance

What is the term for resources owned by a business?

• Assets

• Liabilities

• Equity

• Expenses

The left side of the T-account is always the:

• Debit side

• Credit side

• Asset side

• Liability side

When the owner invests additional cash in the business, it increases:

• Expenses

• Assets

• Liabilities

• Withdrawals