Accounting Equation(Quick Test)

1. The accounting equation is similar to the format of which financial statement?

2. The accounting equation for a sole proprietorship business is Assets = Liabilities + _____________________.

3. Assets = Liabilities + Stockholders’ Equity is the accounting equation for which type of organization?

4. Asset accounts are listed on the left side of the accounting equation and are likely to have account balances on which side of a T-account?

5. Liability and stockholder’ equity accounts are listed on the right side of the accounting equation and are likely to have account balances on which side of a T-account?

6. Which of the answers is an acceptable restatement of the accounting equation of a sole proprietorship?

7. If a corporation has assets of $50,000 and stockholders’ equity of $20,000 what is the amount of its liabilities?

8. If a corporation has liabilities of $50,000 and has stockholders’ equity of $40,000 what is the amount of its assets?

9. What is the effect on the total amount of assets when a business buys a new delivery vehicle with cash?

10. What is the effect on the accounting equation when a corporation borrows $50,000 from its bank?

11. If a corporation collects one of its accounts receivable, what is the effect on the total amount of stockholders’ equity?

12. If a corporation pays one of its accounts payable, what is the effect on the total amount of stockholders’ equity?

13. What will be the effect on the accounting equation when draws (withdrawals of assets for personal use) are made by a sole proprietor?

14. What is the effect on the accounting equation when a corporation purchases land for future expansion by paying part in cash and signing a note payable for the remaining amount?

15. What are the two major components of stockholders’ equity?

16. A new corporation’s first transaction involves earning service fees from a client. The client is allowed to pay the amount owed in the next accounting period. Under the accrual accounting method, how will the accounting equation be affected in the period the services occurred?

17. Under the accrual method of accounting, what is the effect on the accounting equation at the time a corporation receives marketing services and agrees to pay for the services in the subsequent accounting period?

18. A corporation has a balance in its account Prepaid Insurance Expense. When part of the balance expires, what will be the effect on the accounting equation?

19. A corporation (which uses the accrual method of accounting) has an accounting year ending on December 31. What will be the change in the accounting equation in December when the corporation receives money for services that will be performed in the next year?

20. Which parts of the accounting equation are affected when a corporation accrues interest expense?

21. Which parts of the accounting equation are affected when a corporation accrues the service revenues it has earned but the client has not yet paid?

22. What will be the effect on the accounting equation when a corporation earns the revenues that it had deferred in an earlier accounting period?

23. Under the accrual method of accounting, which of the answers will cause a corporation’s stockholders’ equity to increase?

24. At the beginning of the accounting year, a sole proprietor’s business had assets of $50,000 and liabilities of $28,000. At the end of the accounting year, the business had assets of $59,000 and liabilities of $35,000. Assuming the owner did not withdraw any assets or make any additional investment into the business, what was the proprietorship’s net income for the year?

25. At the beginning of the accounting year, a corporation had assets of $60,000 and liabilities of $35,000. At the end of the accounting year, the corporation has assets of $80,000 and liabilities of $25,000. What was the increase in the amount of stockholders’ equity during the year?

26. At the beginning of the accounting year, a corporation had assets of $80,000 and liabilities of $50,000. At the end of the accounting year, the corporation has assets of $90,000 and liabilities of $35,000. What was the increase in the amount of stockholders’ equity during the year?

27. At the beginning of the accounting year, a corporation had assets of $80,000 and liabilities of $50,000. During the year, assets increased by $20,000 and stockholders’ equity decreased by $8,000. What is the amount of liabilities at the end of the year?

28. During a recent year, a corporation did not declare any dividends, did not issue any shares of stock, and did not have other comprehensive income. If stockholders’ equity increased by $50,000 during the year and revenues amounted to $125,000, what were the expenses for the year?

29. During the year a sole proprietorship’s assets increased by $25,000 while its liabilities increased by $10,000. The owner did not invest any additional money in the business, but did withdraw $8,000. If the business had expenses of $50,000 during the year, what were the revenues for the year?

30. Which type of organization will have “+ Revenues – Expenses – Dividends” in its expanded accounting equation?