Question

11. The following accounts are listed in order of liquidity...

A. Current Assets
B. Current Liabilities
C. Both A and B
D. Long-term assets
E. none of the above

13. Retained earnings are found on the...

A. Balance Sheet
B. Income Statement
C. Neither A nor B
D. Noth A and B

15. A credit entry has the following effect on a liability account..

A. Increases
B. Decreases
C. No effect

17. Goldstone LLC purchases a machine on credit a liability account increases and...

A. An asset account increases
B An asset account decreases
C. An owner's equity account decreases
D. None of the Above

18. The adjusting entry dealing with prepaid rent, debits and owner's equity account and credits which type of account?

A. Asset
B. Liability
C. Owners Equity
D. None of the above

19. Greenway LLC purchased equiptment on credit. The Equipment account increases and ...

A. A liability account decreases
B. A liability account increases
C. An asset account decreases
D. None of the above

Answer 1

11) The following accounts are listed in order of liquidity..” A” i.e CURRENT ASSETS

Explanation: In the balance sheet the Assets are presented following the principle of listing them in their order of liquidity. In the Current Assets account the order of liquidity is followed by listing the items in the order of time it would take to convert into cash and therefore they are listed as per the order given below(i.e most liquid first and least liquid at the end):

    (a) Cash

    (b)Marketable Securities

    (c )Accounts Receivable

    (d )Inventory

13. Retained earnings are found on the..Both A and B

Explanation: Retained Earnings are the cumulative net earnings or profit of a company after paying dividends and theses appear in the company’s Balance Sheet. Though it is not usually or typically done but retained earnings can be listed sometimes at the bottom of the income statement after net income.

15) A credit entry has the following effect on a liability account.. “ A “ i.e INCREASES

Explanation: A liability normally has a credit balance and when a credit entry is passed to this liability a/c , the liability increases.

17) Goldstone LLC purchases a machine on credit a liability account increases and. “A” i.e An Asset Account Increases

Explanation: When an Asset is purchased on credit the asset account is debited and the Liability account is credited with the same amount. Since assets normally have a debit balance , Increase in the debit balance is due to increase in assets.

18) The adjusting entry dealing with prepaid rent, debits and owner's equity account and credits which type of account? “ A” i.e ASSETS

Explanation: When the adjusting entry is passed the prepaid rent which is an asset is decreased (i.e Credited) as the income statement has an expense Rent of the same amount and because of this the Net income of the year decreases which in turn reduces the retained earnings and therefore leading to a reduction in the owner’s equity(i.e debited)

19) Greenway LLC purchased equiptment on credit. The Equipment account increases and ..”B “ i.e LIABILITY INCREASES

Explanation:When an asset(Equipment) is purchased on credit, there is an increase in the assets i.e debit increases by the equipment value and correspondingly following the double entry system of book keeping there is a corresponding increase in the liability( Creditors)