Question

_{1.)Cash is received from a client for office rental space. What effect will this transaction have on the components of the accounting equation?}

_{Increase cash and decrease equity}

_{Increase cash and increase equity}

_{Decrease cash and increase equity}

_{Decrease cash and increase dividends}

_{None of the above}

_{2.)Which of the following are creditors' claim on the assets of a company?}

_{Accounts Receivables}

_{Owner's Equity}

_{Retained Earnings}

_Liabilities

_{None of the above}

_{3.)Which of the following statements describes a company's financial position at a point in time?}

_{Income Statement}

_{Statement of Retained Earnings}

_{Balance Sheet}

_{Statement of Cash Flows}

_{None of the Above}

Answer 1

1.b.increase cash and increase equity.

since cash is received, the cash will increase.

Rent is received, so it is a form of revenue, receipt of revenue will increase equity.

2.d.liabilities.

liabilities are the creditors claim on company's assets.

accounts receivables are assets.

owner's equity and retained earnings belong to common stockholders.

3.c.balance sheet.

balance sheet shows the financial position at the given point of time.

Income statement shows the operating results for the period.

statement of retained earnings shows the additions and deletions to retained earnings.