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Accounting concepts: classification and effects to accounting equation

Multiple Choice Questions on Accounting Concepts

1)An example of an asset is:
a)a bank loan.
b)workers' wages.
c)a computer.
d)profit.

2) If you start a window cleaning business and deposit $1,000 of your own personal money in a bank account for the business, what effects are there to the accounting equation (Assets = Liabilities + Owner's Equity)?
a)Assets are decreased and Liabilities are decreased
b)Assets are increased and Owner's Equity is increased.
c)Assets are increased and Owner's Equity is decreased.
d)Liabilities are decreased and Owner's Equity is increased.

3)You own a window cleaning business. You complete cleaning the windows in an office building and charge your customer $500. What effects are there to the accounting equation (Assets = Liabilities + Owner's Equity)?
a)Assets are increased by $500 and Liabilities are increased by $500.
b)Assets are decreased by $500 and Liabilities are decreased by $500.
c)Assets are decreased by $500 and Owner's Equity is decreased by $500.
d)Assets are increased by $500 and Owners's Equity is increased by $500.

4)You own a Lawn Service business. If you charge a customer $30 for mowing their lawn, what is the $30 to your business?
a)Revenue
b)Expense
c)Liability
d)Obligation

5)You own a Lawn Service business. You pay $500 for gasoline and store it in a holding tank. What is the gasoline?
a)expense
b)liability
c)asset
d)owner's equity

6)You own a Lawn Service business. You store gasoline in a holding tank and draw it out as you need it. You mow lawns all day and use $20 worth of gasoline. What is the $20 worth of gasoline?
a)expense
b)liability
c)asset
d)owner's equity

Solution Preview

1) c - A computer is something the business has (or owns). It would probably be classified as an Asset called Office Equipment

2)b - The business got something (Cash) and it owes the owner for it (Owner's Equity).

3)d ...

Solution Summary

The solution provides excellent responses to the questions on accounting concepts.

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