Question

In: Accounting

The Balance Sheet provides information about _____________, ____________ and ______________. Cash paid this is owed to...

  1. The Balance Sheet provides information about _____________, ____________ and ______________.
  2. Cash paid this is owed to an individual reduces a _____________ account.
  3. Supplies purchases increase a _____________ account and reduces a ____________ account.
  4. Complete the following table:

Account

Debit

Credit

Increase

Decrease

Increase

Decrease

Decrease

Increase

Decrease

Increase

Decrease

Increase

  1. Which of the following is not a Liability?
  1. Money owed to bank
  2. Cash borrowed from a friend
  3. Money borrowed from bank to buy building
  4. Money paid to purchase stock investments
  1. Finish the equation: _______________ - ________________= Net Income.
  2. Which of the following statements is false?
    1. When assets decrease, it is a credit.
    2. When liabilities decrease, it is a debit.
    3. When expenses increase it is a credit.
    4. When revenues decrease, it is a debit

  1. Which of the following statements is true?
  1. When you receive a loan from the bank, you increase an asset account.
  2. When you pay cash to buy supplies, you increase a liability account.
  3. When you purchase investments, you increase a revenue account.
  4. When you pay back the loan from the bank, you increase a liability account.
  1. Identify the following accounts as an Asset, Liability, Revenue or Expense
  1. Salaries Payable
  2. Fees earned from providing tax services
  3. Advertising Bill
  4. Long-term debt
  5. Accrued Revenue
  6. Prepaid Rent
  7. Land
  8. Supplies used during the month
  9. Notes Receivable
  10. Inventory
  11. Cash
  12. Vehicles
  13. Cash paid for a bill that is not yet due
  14. Payment received from customer
  15. Fees paid to bank
  1. Which of the following is not a current asset?
    1. Cash
    2. Accounts payable
    3. Inventory
    4. Property, plant, and equipment
  2. What is the entry on the balance sheet when a company borrows a bank loan of $1,000?
    1. $1,000 credit in current liabilities; $1,000 debit in current assets
    2. $1,000 credit in current liabilities; $1,000 debit in non-current assets
    3. $1,000 credit in non-current liabilities; $1,000 debit in current assets
    4. $1,000 credit in non-current liabilities; $1,000 debit in non-current assets
  3. What happens to the balance sheet when a company makes sales of $500, of which $300 is paid in cash and $200 is sold on credit?
    1. $300 debit in cash; $200 debit in accounts receivable
    2. $300 credit in cash; $200 credit in accounts receivable
    3. $300 debit in cash; $200 debit in accounts payable
    4. $300 credit in cash; $200 credit in accounts payable

  1. What happens to the balance sheet when a company pays salaries of $5,000?
    1. $5,000 credit in cash; $5,000 debit in accounts payable

  1. $5,000 credit in cash; $5,000 debit in equity

  1. $5,000 debit in cash; $5,000 credit in equity

  1. $5,000 credit in cash; $5,000 debit in accounts receivable

  1. If at the end of the month, the liabilities total $18,000, and equity totals $32,000, then what must be the total of the assets?  
  1. $14,000
  2. $18,000  
  3. $32,000  
  4. $50,000  
  5. None of the above

  1. The total assets and total liabilities of a firm are reported on which of the following?  
  1. Income statement  
  2. Balance sheet  
  3. Statement of cash flows  
  4. Statement of owner's equity  
  5. None of the above

Solutions

Expert Solution

  1. The Balance Sheet provides information about _____________, ____________ and ______________. Ans: Assets, Liabilities and Equity
  2. Cash paid this is owed to an individual reduces a _____________ account. Ans: Cash Account
  3. Supplies purchases increase a _____________ account and reduces a ____________ account. Ans: Increases, stock of goods and Reduces Cash/ Bank Account
  4. Complete the following table:

Account

Debit

Credit

Expenses

Increase

Decrease

Assets

Increase

Decrease

Incomes

Decrease

Increase

Liabilities

Decrease

Increase

Equity

Decrease

Increase

  1. Which of the following is not a Liability?
  1. Money owed to bank
  2. Cash borrowed from a friend
  3. Money borrowed from bank to buy building
  4. Money paid to purchase stock investments

Ans: 4 (In option 4, payment is made for purchase, that means it is paid out of available funds and it is not a liability)

6. Finish the equation: _______________ - ________________= Net Income.

Ans: Gross Income - Expenses = Net Income

  1. 7. Which of the following statements is false?
    1. When assets decrease, it is a credit.
    2. When liabilities decrease, it is a debit.
    3. When expenses increase it is a credit.
    4. When revenues decrease, it is a debit

Ans: 3 (Expenses are Debit items, so for expenses increase is a debit and decrease is a credit)

  1. Which of the following statements is true?
  1. When you receive a loan from the bank, you increase an asset account.
  2. When you pay cash to buy supplies, you increase a liability account.
  3. When you purchase investments, you increase a revenue account.
  4. When you pay back the loan from the bank, you increase a liability account.

Ans: 1 (Cash asset is increased when a loan is received from the bank)

9. Identify the following accounts as an Asset, Liability, Revenue or Expense

  1. Salaries Payable - Liability
  2. Fees earned from providing tax services - Revenue
  3. Advertising Bill - Expense
  4. Long-term debt - Liability
  5. Accrued Revenue - Asset
  6. Prepaid Rent - Asset
  7. Land - Asset
  8. Supplies used during the month - Expense
  9. Notes Receivable - Asset
  10. Inventory - Asset
  11. Cash - Asset
  12. Vehicles - Asset
  13. Cash paid for a bill that is not yet due - Asset
  14. Payment received from customer - Revenue
  15. Fees paid to bank - Expense
  1. Which of the following is not a current asset?
    1. Cash
    2. Accounts payable
    3. Inventory
    4. Property, plant, and equipment

Ans: 4. Property, Plant and Equipment (It is a Fixed asset, more over accounts payable is a liability and not a asset at all

  1. 11. What is the entry on the balance sheet when a company borrows a bank loan of $1,000?
    1. $1,000 credit in current liabilities; $1,000 debit in current assets
    2. $1,000 credit in current liabilities; $1,000 debit in non-current assets
    3. $1,000 credit in non-current liabilities; $1,000 debit in current assets
    4. $1,000 credit in non-current liabilities; $1,000 debit in non-current assets

Ans:3. Debit Cash account which is current assets and credit loan account which is non-current liabilities

  1. 12. What happens to the balance sheet when a company makes sales of $500, of which $300 is paid in cash and $200 is sold on credit?
    1. $300 debit in cash; $200 debit in accounts receivable
    2. $300 credit in cash; $200 credit in accounts receivable
    3. $300 debit in cash; $200 debit in accounts payable
    4. $300 credit in cash; $200 credit in accounts payable

Ans: 1 (for cash sales debit the cash account and for credit sales debit the accounts receivable)

  1. What happens to the balance sheet when a company pays salaries of $5,000?
    1. $5,000 credit in cash; $5,000 debit in accounts payable
  1. $5,000 credit in cash; $5,000 debit in equity
  1. $5,000 debit in cash; $5,000 credit in equity
  1. $5,000 credit in cash; $5,000 debit in accounts receivable

Ans: 2. (when salaries are paid it reduces cash account which is credit in cash and also reduces profit which is debit in equity)

  1. If at the end of the month, the liabilities total $18,000, and equity totals $32,000, then what must be the total of the assets?  
  1. $14,000
  2. $18,000  
  3. $32,000  
  4. $50,000  
  5. None of the above

Ans: 4 $50,000 (assets = liabilities + Equity)

  1. The total assets and total liabilities of a firm are reported on which of the following?  
  1. Income statement  
  2. Balance sheet  
  3. Statement of cash flows  
  4. Statement of owner's equity  
  5. None of the above

Ans: 2. Balance Sheet (statement of assets and liabilities is called Balance Sheet)


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