Ch. 1 Test Review

Which of these would be considered a merchandising business?

• A dentist’s practice

• A supermarket

• A law firm

• An accounting firm

Which of these businesses would be classified as a manufacturing business?

• Macy’s department store

• Coca-Cola

• Parkway Family Physicians

• Mercy Hospital

Which of these businesses would be classified as a service business?

• A family-owned grocery store

• A construction company

• A large accounting firm

• A company that sells office supplies

Which of the following items is not an asset?

• Accounts receivable

• Accounts payable

• Cash

• Supplies

Notes payable are classified as

• an asset

• revenue

• owner’s equity

• a liability

The basic accounting equation is normally written as

• Assets + Liabilities = Owner’s Equity

• Assets = Liabilities + Owner’s Equity

• Assets = Revenues – Expenses

• Assets + Owner’s Equity = Liabilities

If total liabilities are $75,000 and owner’s equity is $150,000, total assets must be

• $75,000

• $250,000

• $150,000

• $225,000

An activity that changes the value of a firm’s assets, liabilities, or owner’s equity is referred to as a(n)

• service business

• net loss

• income statement

• transaction

Maya invested $20,000 cash to start her business. How would this transaction impact the basic accounting equation?

• There is no impact to the accounting equation

• Increase Assets by $20,000 and increase Liabilities by $20,000

• Increase Assets by $20,000 and increase Owner’s Equity by $20,000

• Increase Cash by $20,000 and increase Accounts Payable by $20,000

What effect does revenue have on the accounting equation?

• It increases liabilities

• It increases owner’s equity

• It decreases owner’s equity

• It decreases assets