Account Classification Quiz

What type of account is Accounts Receivable?

• Liability

• Asset

• Owner’s Equity

• Expense

Answer explanation

Accounts Receivable is classified as an Asset because it represents money owed to a company by its customers for goods or services provided.

Owner's Capital is classified under which of the following?

• Liability

• Asset

• Owner’s Equity

• Expense

Answer explanation

Owner's Capital is classified under Owner's Equity, which represents the owner's investment in the business and is considered a part of the company's equity.

Which of the following best describes the nature of Accounts Receivable?

• Money owed by a business to its suppliers

• Money owed to a business by its customers

• The initial investment made by the owner

• A loan taken by the business

Answer explanation

Accounts Receivable refers to money owed to a business by its customers, making the choice 'Money owed to a business by its customers' the correct description.

Which account increases with a debit and represents resources owned by a company?

• Notes Payable

• Accounts Receivable

• Owner's Capital

• Sales Revenue

Answer explanation

Accounts Receivable increases with a debit and represents resources owned by a company, as it reflects money owed by customers for goods or services provided.

Owner's Capital is increased by which of the following?

• Withdrawals

• Expenses

• Investments by the owner

• Liabilities

Answer explanation

Owner's Capital is increased by Investments by the owner, as this represents additional funds contributed by the owner into the business.

Accounts Receivable affects which of the following equations?

• Liabilities = Assets + Owner’s Equity

• Assets = Liabilities + Owner’s Equity

• Owner’s Equity = Assets - Liabilities

• Expenses = Revenues - Assets

Answer explanation

Accounts Receivable is an asset, so an increase in Accounts Receivable will increase Assets in the equation Assets = Liabilities + Owner’s Equity.

When a business owner invests more money into the business, which account is directly increased?

• Accounts Receivable

• Notes Payable

• Owner's Capital

• Cash

Answer explanation

When a business owner invests more money into the business, the Owner's Capital account is directly increased as it represents the owner's investment in the business.

Which of the following statements is true about Owner's Capital?

• It decreases with a debit.

• It is a liability.

• It represents the owner's claim against the assets.

• It is an expense.

Answer explanation

Owner's Capital represents the owner's claim against the assets, making it the correct statement.

If a company sells goods on credit, which account increases?

• Cash

• Accounts Receivable

• Owner's Capital

• Notes Payable

Answer explanation

When a company sells goods on credit, the Accounts Receivable account increases as it represents the amount owed by customers for goods sold on credit.

The balance of Accounts Receivable is typically found on which financial statement?

• Income Statement

• Balance Sheet

• Statement of Owner's Equity

• Cash Flow Statement

Answer explanation

The balance of Accounts Receivable is typically found on the Balance Sheet, which provides a snapshot of a company's financial position at a specific point in time.