QUIZ ONE

CHAPTER ONE
Question One: Choose The Appropriate Letter (with explanation)

Which of the following is not a step in the accounting

process?
a. identification.
b. recording.
C. verification.
d. communication.

The accounting process includes: 1- Identification;

2- then, Recording: 3- then, Communication
Question One: Choose The Appropriate Letter (with explanation)

Which of the following events is not recorded in the

accounting records?
a. Equipment is purchased on account.
b. An employee is terminated.
c. A cash investment is made into the business.
d. The owner withdraws cash for personal use.
Accounting is the information system that identifies, records, and
communicates the economic events of an organization to interested users.
Question One: Choose The Appropriate Letter (with explanation)

During 2010, Gibson Company’s assets decreased

$50,000 and its liabilities decreased $90,000. Its
owner’s equity therefore:
a. increased $40,000.
b. decreased $140,000.
c. decreased $40,000.
d. increased $140,000.
Basic accounting equation : Assets = Liabilities + Owner’s Equity.
Question One: Choose The Appropriate Letter (with explanation)

Payment of an account payable affects the

components of the accounting equation in the
following way.
a. Decreases owner’s equity and decreases liabilities.
b. Increases assets and decreases liabilities.
c. Decreases assets and increases owner’s equity.
d. Decreases assets and decreases liabilities.

The account payable is an item of liabilities

Question One: Choose The Appropriate Letter (with explanation)

The financial statement that reports assets, liabilities,

and owner’s equity is the:
a. income statement.
b. owner’s equity statement.
c. balance sheet.
d. statement of cash flow.
Balance sheet is a financial statement that reports the
assets, liabilities, and owner’s equity at a specific date.
Question One: Choose The Appropriate Letter (with explanation)

On the last day of the period, Jim Otto Company buys a

$900 machine on credit. This transaction will affect the:
a. income statement only.
b. balance sheet only.
c. income statement and owner’s equity statement
only.
d. income statement, owner’s equity statement, and
Because
balance this transaction affects into equipments and
sheet.
account payable that appear in the balance sheet only.
 Question Two:
On April 1, Vinnie Venuchi established Vinnie’s Travel Agency. The following transactions were completed
during the month.
1.Invested $15,000 cash to start the agency.
2.Paid $600 cash for April office rent.
3.Purchased office equipment for $3,000 cash.
4.Incurred $700 of advertising costs in the Chicago Tribune, on account.
5.Paid $800 cash for office supplies.
6.Earned $11,000 for services rendered: $3,000 cash is received from customers, and the balance of
$8,000 is billed to customers on account.
7.Withdrew $500 cash for personal use.
8.Paid Chicago Tribune amount due in transaction.
9.Paid employees’ salaries $2,200.
10.Received $4,000 in cash from customers who have previously been billed in transaction.
Instructions
a)Prepare a tabular analysis of the transactions using the following column headings: Cash, Accounts
Receivable, Supplies, Office Equipment, Accounts Payable, V.Venuchi, Capital; V.Venuchi, Drawings;
Revenues, and Expenses.
b)From an analysis of the owner’s equity columns, compute the net income or net loss for April.
 V. VENUCHI FOR TRAVEL AGENCY
Income Statement
For the Month Ended April 30
 
Revenues
Service revenue
$11,000
Expenses
Rent expense $600
Advertising expense 700
Salaries expense 2,200
Total expenses
(3,500)
Net income
$7,500
 V. VENUCHI FOR TRAVEL AGENCY
Owner’s Equity Statement
For the Month Ended April 30
 
Owner’s capital, June 1 $ 0
Add:
Investments $15,000
Net income 7,500
22,500
Less:
Drawings (500)
Owner’s capital, June 30 $22,000