Accounting Equation, Assets, Liabilities, Financial Accounting Fundamentals Quiz
The key terms in this Financial Accounting course include Financial Accounting, Accounting Equation, Assets, Liabilities, Equity, Balance Sheet, Accounts Receivable, Normal Balance (Debit or Credit), Dividends, Unearned Revenue, Cost of Goods Sold, Sales Discounts, Net Income, Common Stock
If a company purchases equipment costing $4,400 on credit, the effect on the accounting equation would be:
Assets increase $4,400 and liabilities decrease $4,400.
Equity decreases $4,400 and liabilities increase $4,400.
Liabilities decrease $4,400 and assets increase $4,400.
Assets increase $4,400 and liabilities increase $4,400.
Equity increases $4,400 and liabilities decrease $4,400.
A company’s balance sheet shows: cash $32,000, accounts receivable $38,000, equipment $66,000, and equity $80,000. What is the amount of liabilities?
$136,000.
$116,000.
$56,000.
$76,000.
$216,000.
Explanation
Assets − Equity = Liabilities
Cash + Accounts Receivable + Equipment − Equity = Liabilities
$32,000 + $38,000 + $66,000 − $80,000 = $56,000
Identifying normal balance
Identify the normal balance (debit or credit) for each of the following accounts.
| Normal Ending Balance | ||
| a. | Dividends | Debit |
| b. | Unearned Revenue | Credit |
| c. | Common Stock | Credit |
| d. | Accounts Receivable | Debit |
| e. | Janitorial Expense | Debit |
| f. | Equipment | Debit |
| g. | Office Supplies | Debit |
| h. | Unearned Ticket Revenue | Credit |
| i. | Office Equipment | Debit |
Cushman Company had $846,000 in sales, sales discounts of $12,690, sales returns and allowances of $19,035, cost of goods sold of $401,850, and $291,025 in operating expenses. Net income equals:
$814,275.
$153,125.
$412,425.
$121,400.
$184,850.
Explanation
Net Income = $846,000 – $12,690 – $19,035 – $401,850 – $291,025 = $121,400
If a company purchases equipment costing $4,400 on credit, the effect on the accounting equation would be:
Assets increase $4,400 and liabilities decrease $4,400.
Equity decreases $4,400 and liabilities increase $4,400.
Liabilities decrease $4,400 and assets increase $4,400.
Assets increase $4,400 and liabilities increase $4,400.
Equity increases $4,400 and liabilities decrease $4,400.
A company’s balance sheet shows: cash $32,000, accounts receivable $38,000, equipment $66,000, and equity $80,000. What is the amount of liabilities?
$136,000.
$116,000.
$56,000.
$76,000.
$216,000.
Explanation
Assets − Equity = Liabilities
Cash + Accounts Receivable + Equipment − Equity = Liabilities
$32,000 + $38,000 + $66,000 − $80,000 = $56,000
Identifying normal balance
Identify the normal balance (debit or credit) for each of the following accounts.
| Normal Ending Balance | ||
| a. | Dividends | Debit |
| b. | Unearned Revenue | Credit |
| c. | Common Stock | Credit |
| d. | Accounts Receivable | Debit |
| e. | Janitorial Expense | Debit |
| f. | Equipment | Debit |
| g. | Office Supplies | Debit |
| h. | Unearned Ticket Revenue | Credit |
| i. | Office Equipment | Debit |
Cushman Company had $846,000 in sales, sales discounts of $12,690, sales returns and allowances of $19,035, cost of goods sold of $401,850, and $291,025 in operating expenses. Net income equals:
$814,275.
$153,125.
$412,425.
$121,400.
$184,850.
Explanation
Net Income = $846,000 – $12,690 – $19,035 – $401,850 – $291,025 = $121,400