Review of financial accounting basics

Basic Accounting Equation

Assets = Liabilities + Stockholders' Equity

(resources) (claims to resources)

1. Which financial statement reports a company’s assets and liabilities?

a. Income statement.
b. Statement of cash flows.
c. Balance sheet. Answer
d. Statement of stockholders’ equity.

2. Which financial statement shows a company’s revenues and expenses?

a. Income statement. Answer
b. Statement of stockholders’ equity.
c. Balance sheet.
d. Statement of cash flows.

3. If equity is $300,000 and liabilities are $192,000, then assets equal: 

A. $108,000.
B. $192,000.
C. $300,000.
D. $492,000. Answer

4. The assets section of the balance sheet should include

a. Depreciation expense. b. common stock. c. accounts payable. d. inventory. Answer

5. Thomas Corp adjusted trials balance contained the following accounts at 12/31/2019, which
one is not a liability account:
A. Bonds payable (due in 3 years) B. Salary expense Answer
C. Notes payable D. Income tax payable

6. Which of the following basic elements of financial statements is more associated with the
balance sheet than the income statement?
a. Equity Answer b. Revenue c. Gains d. Expenses

7. Debit always means

a. the right side of an account. b. an increase.
c. a decrease. d. None of these answer choices are correct. Answer
8. The double-entry accounting system means
a. Each transaction is recorded with two journal entries.
b. Each item is recorded in a journal entry, then in a general ledger account.
c. The dual effect of each transaction is recorded with a debit and a credit. Answer
d. None of these answer choices are correct.

9. A debit is used to decrease which of the following accounts?

a. Salaries Expense. b. Accounts Payable. Answer c. Dividends. d. Supplies.