Introduction To Accounting Quiz!
What is accounting? Take this quiz on introduction to accounting and see what knowledge you have. It is basically the process related to finances and other information about businesses and corporations. Here, we have designed a few questions to check your understanding and knowledge of accounting. This accounting quiz is a bit expert-level. So, be prepared to excel on the quiz with a perfect score! You can also share the quiz with others who wish to test their accounting knowledge.
Questions and Answers
- 1.
Cash, Debtors, Land, and Equipment are examples of ___________. (State whether these are Assets, Liabilities, or Owner's Equity).
Explanation
Cash, Debtors, Land, and Equipment are examples of assets. Assets are resources owned by a company that have economic value and are expected to provide future benefits. Cash represents the company's available funds, debtors are customers who owe the company money, land is a tangible asset that the company owns, and equipment is a long-term asset used in the company's operations. All of these items contribute to the company's overall value and can be used to generate revenue.Rate this question:
- 2.
Creditors, Short Term Loan, and Notes Payable are examples of ___________. (State whether these are Assets, Liabilities, or Owner's Equity).
Explanation
Creditors, Short Term Loan, and Notes Payable are examples of liabilities. Liabilities are obligations or debts that a company owes to external parties. Creditors represent the amount owed to suppliers or vendors for goods or services received but not yet paid for. Short Term Loan refers to a loan that is due within one year, and Notes Payable represents a written promise to repay a specific amount within a certain period. All these examples indicate amounts that the company owes to others, making them liabilities.Rate this question:
- 3.
Determine the net effect of the transaction by keying in i = increased, d = decreased, n = no effect. Purchased equipment for cash: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example i n i (This means Assets increased, Liabilities have no effect, and Owner's Equity increased. If Assets increased and decreased and Liabilities have no effect and Owner's Equity has no effect, the answer should be id n n).
Explanation
The transaction of purchasing equipment for cash would result in an increase in assets (represented by "i"), as the company now owns the equipment. There would be no effect on liabilities (represented by "n"), as no debts or obligations were incurred in the transaction. Finally, there would be no effect on owner's equity (represented by "n"), as the transaction did not involve any contributions or withdrawals by the owner. The answer provided, "id n n,di n n," indicates that the first transaction resulted in an increase in assets and no effect on liabilities or owner's equity, while the second transaction resulted in a decrease in assets and no effect on liabilities or owner's equity.Rate this question:
- 4.
Determine the net effect of the transaction by keying in i = increased, d = decreased, n = no effect. Paid creditors: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example, i n i (This means Assets increased, Liabilities have no effect, and Owner's Equity increased. If Assets increased and decreased and Liabilities have no effect and Owner's Equity has no effect, the answer should be id n n).
Explanation
The transaction of paying creditors will decrease both assets and liabilities, but it will have no effect on owner's equity. Therefore, the net effect of the transaction is a decrease in assets, a decrease in liabilities, and no effect on owner's equity.Rate this question:
- 5.
Determine the net effect of the transaction by keying in i = increased, d = decreased, n = no effect. Borrowed monies from bank: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example: i n i (This means Assets increased, Liabilities have no effect and Owner's Equity increased. If Assets increased and decreased and Liabilities have no effect and Owner's Equity has no effect, the answer should be id n n).
Explanation
The transaction of borrowing money from the bank will increase both the assets and liabilities of the company. The assets will increase because the company now has more cash (or equivalent) on hand, which is considered an asset. The liabilities will increase because the company now owes money to the bank, which is considered a liability. However, the transaction does not have any effect on the owner's equity, as it is a separate category that represents the owner's investment in the business. Therefore, the correct answer is "i i n".Rate this question:
- 6.
Determine the net effect of the transaction by keying in i = increased, d = decreased, n = no effect. Received monies from debtor: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example, i n i (This means Assets increased, Liabilities have no effect, and Owner's Equity increased. If Assets increased and decreased and Liabilities have no effect and Owner's Equity has no effect, the answer should be id n n).
Explanation
The transaction of receiving monies from a debtor will result in an increase in assets (i), as the company now has more cash or accounts receivable. There is no effect on liabilities (n), as the company does not owe any additional debts. There is also no effect on owner's equity (n), as the increase in assets does not result in any changes to the owner's investment or retained earnings. Therefore, the net effect of the transaction is id n n.Rate this question:
- 7.
Determine the net effect of the transaction by keying in i = increased, d = decreased, n = no effect. Owner contributed some furniture to the business: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example i n i (This means Assets increased, Liabilities have no effect, and Owner's Equity increased. If Assets increased and decreased and Liabilities have no effect and Owner's Equity has no effect, the answer should be id n n).
Explanation
The net effect of the transaction is that Assets increased, Liabilities have no effect, and Owner's Equity increased.Rate this question:
- 8.
Determine the net effect of the transaction by keying in i = increased, d = decreased, n = no effect. Sold away motor vehicle on credit: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example, i n i (This means Assets increased, Liabilities have no effect, and Owner's Equity increased. If Assets increased and decreased and Liabilities have no effect and Owner's Equity has no effect, the answer should be id n n).
Explanation
The transaction involves selling a motor vehicle on credit. This means that the assets of the company will decrease (d), as the vehicle is no longer owned by the company. There is no effect on liabilities (n), as the company has not taken on any new debts or obligations. However, the owner's equity will increase (i), as the company will receive payments from the credit sale. Therefore, the net effect of the transaction is id n n. Additionally, if there is another transaction where the company buys a new motor vehicle on credit, the assets will increase (i) as the company acquires a new asset, while liabilities and owner's equity will have no effect (n). Therefore, the net effect of this transaction is di n n.Rate this question:
- 9.
Determine the net effect of the transaction by keying in i = increased, d = decreased, n = no effect. Repay a bank loan: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example, i n i (This means Assets increased, Liabilities have no effect, and Owner's Equity increased. If Assets increased and decreased and Liabilities have no effect and Owner's Equity has no effect, the answer should be id n n).
Explanation
Repaying a bank loan would decrease both assets and liabilities, as the loan is a liability that is being paid off. However, it would have no effect on owner's equity, as this is not directly impacted by loan repayments. Therefore, the net effect of the transaction is a decrease in assets and liabilities, with no effect on owner's equity.Rate this question:
- 10.
Bought equipment worth $10,000 on credit.
- A.
Equipment decreased by $10,000 & Debtors decreased by $10,000
- B.
Equipment increased by $10,000 & Creditors increased by $10,000
- C.
Equipment decreased by $10,000 & Debtors increased by $10,000
- D.
Equipment increased by $10,000 & Bank loan increased by $10,000
Correct Answer
B. Equipment increased by $10,000 & Creditors increased by $10,000Explanation
When equipment is bought on credit, it means that the company has acquired the equipment but has not yet paid for it. This results in an increase in the equipment asset account by $10,000 since the company now owns the equipment. At the same time, the company has incurred a liability to the creditor for the amount owed, resulting in an increase in the creditors account by $10,000.Rate this question:
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- 11.
Paid creditor $5,000.
- A.
Creditors increased by $5,000 & Cash decreased by $5,000
- B.
Creditors decreased by $5,000 & Cash decreased by $5,000
- C.
Creditors increased by $5,000 & Cash increased by $5,000
- D.
Creditors decreased by $5,000 & Cash increased by $5,000
Correct Answer
B. Creditors decreased by $5,000 & Cash decreased by $5,000Explanation
The correct answer is "Creditors decreased by $5,000 & Cash decreased by $5,000." This is because when a creditor is paid, it means that the company is reducing its debt or liability to the creditor. Therefore, the amount owed to the creditor decreases by $5,000. At the same time, cash is also decreased by $5,000 as it is being used to make the payment to the creditor.Rate this question:
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- 12.
The owner took some office equipment for personal use.
- A.
Equipment increased & Capital increased
- B.
Equipment decreased & Capital increased
- C.
Equipment decreased & Capital decreased
- D.
Equipment increased & Capital decreased
Correct Answer
C. Equipment decreased & Capital decreasedExplanation
The correct answer is "Equipment decreased & Capital decreased" because when the owner takes some office equipment for personal use, it means that the equipment is no longer a part of the business assets. As a result, the equipment decreases in value. Additionally, since the equipment was taken for personal use, it does not contribute to the capital of the business anymore, causing a decrease in capital as well.Rate this question:
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- 13.
Which accounting concept gives rise to the accounting equation?
- A.
Historical cost
- B.
Going concern
- C.
Monetary concept
- D.
Accounting entity
Correct Answer
D. Accounting entityExplanation
The accounting concept that gives rise to the accounting equation is the accounting entity concept. This concept states that a business is separate from its owners and other entities, and therefore its financial transactions should be recorded separately. The accounting equation, which states that assets equal liabilities plus equity, is based on this concept. It helps in accurately representing the financial position of the business and ensures that all transactions are recorded in a systematic and organized manner.Rate this question:
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- 14.
Which accounting theory states that all transactions must be recorded at their cost at the time the transaction takes place?
- A.
Historical cost
- B.
Going concern
- C.
Monetary concept
- D.
Accounting entity
Correct Answer
A. Historical costExplanation
The accounting theory of historical cost states that all transactions must be recorded at their cost at the time the transaction takes place. This means that assets are recorded at their original cost, regardless of their current market value. This concept ensures that financial statements provide a reliable and objective representation of a company's financial position and performance. It also allows for consistency and comparability in financial reporting, as the historical cost is verifiable and less subject to manipulation or estimation.Rate this question:
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- 15.
The Accounting Equation is
- A.
Owner's Equity = Assets + Liabilities
- B.
Assets = Liabilities - Owner's Equity
- C.
Assets = Liabilities + Owner's Equity
- D.
None of the above
Correct Answer
C. Assets = Liabilities + Owner's EquityExplanation
The correct answer is "Assets = Liabilities + Owner's Equity." This equation represents the fundamental principle of accounting, known as the accounting equation. It states that the total assets of a company are equal to the sum of its liabilities and owner's equity. This equation is used to ensure that the financial statements of a company are balanced and accurate.Rate this question:
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- 16.
Items owned by a business that has monetary value are known as:
- A.
Liabilities
- B.
Owner's Equity
- C.
Assets
- D.
All of the above
Correct Answer
C. AssetsExplanation
Assets are items owned by a business that have monetary value. They can include cash, inventory, equipment, and property. Liabilities refer to the debts or obligations of a business, while owner's equity represents the owner's investment in the business. Therefore, the correct answer is Assets.Rate this question:
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- 17.
What is the interest of the owners in the business known as?
- A.
Assets
- B.
Owner's Equity
- C.
Liabilities
- D.
None of the above
Correct Answer
B. Owner's EquityExplanation
The correct answer is Owner's Equity. Owner's Equity refers to the interest or claim that the owners have in a business. It represents the residual interest in the assets of the business after deducting liabilities. It is the amount of money that would be left for the owners if all the assets were sold and all the liabilities were paid off. Therefore, Owner's Equity represents the ownership value or net worth of the business.Rate this question:
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- 18.
Money owed to an outsider is known as
- A.
Asset
- B.
Liability
- C.
Owner's Equity
- D.
Debit
Correct Answer
B. LiabilityExplanation
Money owed to an outsider is known as a liability. This means that it is a debt or obligation that the company or individual owes to someone else. Liabilities can include loans, credit card debt, and accounts payable. They represent the financial obligations that must be fulfilled in the future.Rate this question:
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- 19.
Assets minus Liabilities equals to ________.
Correct Answer
Equity, equityExplanation
In accounting, the formula Assets - Liabilities = Equity represents the financial position of a business. Equity, also known as owner's equity or shareholders' equity, is the residual interest in the assets of the entity after deducting liabilities. It reflects the net worth of the business and represents the amount that would be returned to shareholders if all assets were liquidated and all debts were paid.Rate this question:
- 20.
Capital, drawings, and net income will affect ____________. (State whether these affect Assets, Liabilities, or Owner's Equity).
Correct Answer
Owner's Equity, owner's equityExplanation
Capital, drawings, and net income are directly related to owner's equity in a business. Capital increases when owners invest more money, net income boosts equity when the company earns a profit, and drawings decrease it as owners withdraw funds for personal use. These components reflect changes in the financial position of the business, showing how funds are added or removed from equity, crucial for understanding the overall financial health and operational success of the enterprise.Rate this question:
- 21.
Determine the net effect of the transaction by keying in i = increased, d = decreased, and n = no effect. Invested cash in a business: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example, i n i (This means Assets increased, Liabilities have no effect, and Owner's Equity increased.)
Correct Answer
i n i, (Assets increased, Liabilities have no effect, and Owner's Equity increased)Explanation
The correct answer i n i indicates that the transaction of investing cash in a business resulted in an increase in Assets and Owner's Equity, while Liabilities remained unaffected. This suggests that the cash investment contributed to the overall value of the business and the owner's ownership stake, without impacting any outstanding debts or obligations.Rate this question:
- 22.
Determine the net effect of the transaction by keying in i = increased, d = decreased, n = no effect. Purchased vehicle on credit: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example, i n i (This means Assets increased, Liabilities have no effect, and Owner's Equity increased. If Assets increased and decreased and Liabilities have effect and Owner's Equity has no effect, the answer should be id n n).
Correct Answer
i i nExplanation
Purchasing a vehicle on credit directly increases Assets, reflecting the addition of the vehicle, and increases Liabilities, corresponding to the new debt. Owner's Equity remains unaffected by this specific transaction. The acquisition is financed through debt, not by altering the owner's equity, maintaining the balance in the accounting equation. The concise effect of this financial activity is captured as: i i n.Rate this question:
- 23.
Determine the net effect of the transaction by keying in i = increased, d = decreased, n = no effect. Withdrew monies for personal use: Assets ___ = Liabilities ____ + Owner's Equity ____ State your answer in the box in this format, for example i n i (This means Assets increased, Liabilities have no effect, and Owner's Equity increased. If Assets increased and decreased and Liabilities have no effect and Owner's Equity has no effect, the answer should be id n n).
Correct Answer
d n dExplanation
Withdrawing money for personal use decreases the assets of the business, as cash (an asset) is being taken out.
There is no effect on liabilities because liabilities represent the obligations of the business to external parties, and withdrawing money for personal use does not affect those obligations.
Owner's equity decreases because the owner is taking money out of the business, reducing the owner's claim on the assets.Rate this question:
- 24.
Owner contributed $7,500 cash and $15,000 vehicle to the business.
- A.
Cash increased by $7,500, Vehicle increased by $15,000 & Capital increased by $22,500
- B.
Cash increased by $7,500 & Capital increased by $7,500
- C.
Cash increased by $7,500, Vehicle increased by $15,000 & Capital increased by $7,500
- D.
Cash increased by $7,500, Vehicle increased by $15,000 & Capital decreased by $22,500
Correct Answer
A. Cash increased by $7,500, Vehicle increased by $15,000 & Capital increased by $22,500Explanation
The correct answer is that Cash increased by $7,500, Vehicle increased by $15,000, and Capital increased by $22,500. This is because the owner contributed $7,500 in cash and $15,000 in a vehicle to the business, which results in an increase in both the Cash and Vehicle accounts. Additionally, since the owner's contribution is considered as an increase in the owner's equity, it is reflected as an increase in the Capital account. Therefore, all three accounts - Cash, Vehicle, and Capital - experience an increase in value.Rate this question:
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- 25.
C.K. Enterprise has fittings $4,000, inventory $5,000, debtors $2,750, bank overdraft $3,450 and creditors $1,250. Calculate the amount of owner's equity in the business.
- A.
7,500
- B.
13,500
- C.
7,050
- D.
16,450
Correct Answer
C. 7,050Explanation
Owner's Equity = Assets - Liabilities = (4,000+5,000+2,750) - (3,450+1,250) = 11,750 - 4,700 = 7,050Rate this question:
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Aug 25, 2024Quiz Edited by
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Sep 06, 2011Quiz Created by
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