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Chapter 02 Accounting Flashcards

When equipment is purchased on credit,

a] assets and liabilities increase.
b] assets increase and liabilities decrease.
c] assets and owner’s equity increase.
d] assets and expenses increase.

assets and liabilities increase.
The statement of owner’s equity is prepared before the balance sheet so that the ending capital balance is available.
True
False
True
The net income or net loss for the period is shown on both the income statement and the balance sheet.
True
False
False
Revenue is recorded when cash is collected from charge-account clients.
True
False
False
A withdrawal of funds by the owner for personal use is considered a business expense.
True
False
False
Which financial statement is a representation of the accounting equation?
Balance Sheet
Assets always equal debts of the business plus the financial interest of the owner.
True
False
True
An Income Statement is all of the following except
a] a formal report of business operations.
b] a profit and loss statement.
c] a statement of revenues less withdrawals and expenses.
d] a statement of income and expenses.
a statement of revenues less withdrawals and expenses.
Assets and liabilities are reported on

a] balance sheet.
b] the income statement.
c] the statement of owner’s equity.
d] both the balance sheet and the income statement.

balance sheet.
When cash is collected from accounts receivable, the total amount of assets increases.

True
False

False
Withdrawals by the owner are reported on the income statement.

True
False

False
When equipment is purchased for cash,

a] assets decrease and expenses increase.
b] one asset increases and another asset decreases.
c] assets and owner’s equity increase.
d] assets increase and liabilities decrease.

one asset increases and another asset decreases.
A business transaction is a financial event that affects the resources of a business.

True
False

True
The owner’s investment or equity in a business is called

cash
drawing
capital
accounts payable

capital
A net loss results

a] when expenses are greater than revenue.
b] when assets are greater than liabilities.
c] when revenue is greater than expenses.
d] when expenses are greater than assets.

when expenses are greater than revenue.
A creditor’s claim against the firm’s property lasts until the debt is paid.

True
False

True
The statement of owner’s equity is prepared before the balance sheet so that the ending capital balance is available.

True
False

True
Which financial statement is a representation of the accounting equation?

a] Income Statement
b] Statement of Owner’s Equity
c] Balance Sheet
d] Profit and Loss Statement

Balance Sheet
The rent paid for future months is a(n)

a] asset.
b] liability.
c] expense.
d] revenue.

asset.
When cash is paid to a creditor the firms liabilities decrease
TRUE
If the owner takes cash out of the business for personal use, the withdrawal should be recorded as an expense of the business.
FALSE
The expenses for a period are reported on the balance sheet.
False
If there is an excess of expenses over revenues, the excess represents a profit.
False
The amount of net income or net loss is needed to complete the statement of owner’s equity.
True

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