Fundamental Accounting Concepts
Key Accounting Principles and Practices
Understanding Basic Accounting Concepts
A company that receives money in advance of performing a service:
- a. Debits Cash and credits Unearned Fees
Courtney Company purchased equipment for $1,800 cash. As a result of this event:
- c. Assets remained unchanged.
Which of the following statements is not true?
- a. Expenses increase stockholders’ equity
When a service has been performed, but no cash has been received, which of the following statements is true?
- d. The entry includes a debit to accounts receivable.
Issuing new shares of common stock will:
- c. Increase common stock.
A credit is not the normal balance for which account listed below?
- d. Dividends account
Retained earnings at the end of the period is equal to:
- b. Retained earnings at the beginning of the period plus net income minus dividends.
Which of the following correctly identifies normal balances of accounts?
- d. Assets: Debit
- Liabilities: Credit
- Common Stock: Credit
- Revenues: Credit
- Expenses: Debit
Powers Corporation received a cash advance of $500 from a customer. As a result of this event:
- a. Assets increased by $500.
A business organized as a separate legal entity is a:
- a. Corporation.
A current asset is:
- d. Expected to be converted to cash or used in the business within a relatively short period of time.
Stockholders’ equity is increased by:
- b. Revenues
If total liabilities increased by $5,000, then:
- c. Assets must have increased by $5,000, or stockholders’ equity must have decreased by $5,000.
An accountant has debited an asset account for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction?
- d. Credit a different asset account for $500.
An investment by the stockholders in a business increases:
- a. Assets and stockholders’ equity.
Collection of a $600 Accounts Receivable:
- a. Increases an asset $600; decreases an asset $600.
Johnny’s Car Repair Shop started the year with total assets of $60,000 and total liabilities of $40,000. During the year, the business recorded $100,000 in car repair revenues, $55,000 in expenses, and dividends of $10,000. What was the Stockholders’ equity at the end of the year?
Generally accepted accounting principles (GAAP):
- c. Are accounting rules that are recognized as a general guide for financial reporting.
A debit is not the normal balance for which account listed below?
- d. Service Revenue
Office equipment is classified on the balance sheet as:
- b. Property, plant, and equipment.
Dividends are reported on the:
- b. Retained earnings statement.
Stockholders’ equity is comprised of:
- b. Common stock and retained earnings.
Look chapter 2
Look chapter 2
If total liabilities increased by $14,000 during a period of time and stockholders’ equity decreased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period’s change in total assets is a(n):
- d. $8,000 increase.