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Financial Accounting Practice Exam Review

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100% (31 out of 31 correct) 1. The resources a business owns are called A. revenues. B. equity. C. share capital. D. assets. Correct! Assets are the resources a business owns. 2. The receipt of cash on account increases the total amount of assets to be reported on the statement of financial position. A. True B. False 3. If a business purchases advertising on credit to be used during the current period, then A. revenues will increase. B. assets will increase. C. liabilities will decrease. D. retained earnings will decrease. Correct! The purchase of advertising to be used during the current period on credit causes liabilities to increase and retained earnings to decrease through the associated expense. 4. The receipt of cash on account will A. decrease the Cash account balance. B. increase revenues. C. not change total assets. D. increase total equity. Correct! The receipt of cash on account will increase Cash and decrease Accounts Receivable. Since both are assets, total assets will not change. 5. Performing services on account will have the following effects on the components of the basic accounting equation A. increase assets and decrease equity. B. increase assets and increase equity. C. increase assets and increase liabilities. D. increase liabilities and increase equity. Correct! When services are performed on account, assets are increased and equity is increased. 6. As of December 31, 2014, Stoneland Company has assets of €3,500 and equity of €2,000. What ...
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Anonymous
Awesome! Perfect study aid.

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