Accounting Principles Quiz
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Questions and Answers

What is the amount of the owner's capital reported on the owner's equity statement?

  • $5,200
  • $24,500
  • $16,450 (correct)
  • $8,050

    • Which financial statement includes cash reported as $8,050?

  • Owner's equity statement
  • Statement of cash flows
  • Balance sheet (correct)
  • Income statement

    • How is owner's capital represented at the end of the reporting period?

  • As an expense
  • As part of owner's equity (correct)
  • As an asset
  • As a liability

    • What is the total amount of cash reflected in the financial documents mentioned?

    <p>$8,050 (D)</p> Signup and view all the answers

    In which financial statement is owner's equity primarily shown?

    <p>Balance sheet (D)</p> Signup and view all the answers

    What is the total amount of cash the company received for services performed?

    <p>$8,000 (A)</p> Signup and view all the answers

    What was the amount paid by the company for this month’s rent?

    <p>$850 (B)</p> Signup and view all the answers

    What category does 'Notes Payable' fall under?

    <p>Liability (C)</p> Signup and view all the answers

    How much cash did the owner withdraw for personal use?

    <p>$1,000 (C)</p> Signup and view all the answers

    How should the cost of renting property be classified?

    <p>Expense (C)</p> Signup and view all the answers

    What would be the total effect on cash flow if the owner did not withdraw cash for personal use?

    <p>+$8,000 (C)</p> Signup and view all the answers

    Which category does 'Common Stock' belong to?

    <p>Equity (A)</p> Signup and view all the answers

    Calculate the net cash flow after considering services rendered, rent paid, and owner's withdrawal.

    <p>$6,950 (C)</p> Signup and view all the answers

    If Omar's legal practice has accumulated revenue over the year, how should this be classified?

    <p>Revenue (A)</p> Signup and view all the answers

    In preparing the owner's equity statement, which of the following should be listed as an asset?

    <p>Accounts Receivable (C)</p> Signup and view all the answers

    What effect do owner's drawings have on owner's equity?

    <p>It decreases owner's equity. (C)</p> Signup and view all the answers

    How do salaries expense transactions impact owner's equity?

    <p>They decrease owner's equity. (B)</p> Signup and view all the answers

    Which of the following accurately describes the relationship between owner's drawings and salaries expense?

    <p>Both decrease owner's equity. (D)</p> Signup and view all the answers

    Which financial category do salaries expense transactions fall under?

    <p>Expense (D)</p> Signup and view all the answers

    If owner's drawings are recorded in a financial statement, what would you expect its effect to be?

    <p>Decrease in total owner's equity. (D)</p> Signup and view all the answers

    What is the primary purpose of general purpose financial statements?

    <p>To meet the information needs of a wide range of users (C)</p> Signup and view all the answers

    Who typically benefits most from general purpose financial statements?

    <p>A diverse group of stakeholders including investors and creditors (B)</p> Signup and view all the answers

    Which statement about general purpose financial statements is true?

    <p>They are designed for users who cannot request customized reports (C)</p> Signup and view all the answers

    What is often a limitation of general purpose financial statements?

    <p>They may not address individual stakeholders' specific information needs (B)</p> Signup and view all the answers

    Which of the following is NOT a characteristic of general purpose financial statements?

    <p>They include highly customized financial data (A)</p> Signup and view all the answers

    What happens to the going concern assumption when management plans for the sale or liquidation of an entity?

    <p>It is set aside and financial statements are prepared using estimated values. (A)</p> Signup and view all the answers

    What are the financial statements based on when the going concern assumption is set aside?

    <p>Estimated sales or liquidation values (C)</p> Signup and view all the answers

    In what scenario is the going concern assumption likely to be disregarded?

    <p>When a company is facing widespread financial difficulties (A)</p> Signup and view all the answers

    Why is the going concern assumption important in financial reporting?

    <p>It supports the continuity of operations in reporting. (A)</p> Signup and view all the answers

    What financial reporting method is employed when preparing for the liquidation of an entity?

    <p>Estimated sales or liquidation value accounting (D)</p> Signup and view all the answers

    Flashcards

    Cash received for services

    The company received $8,000 in cash for services performed.

    Rent payment

    The company paid $850 for this month's rent.

    Owner withdrawal

    The owner withdrew $1,000 cash for personal use.

    Owner's Capital

    The amount of money invested into the business by the owner, shown on the balance sheet.

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    Owner's Drawings

    Owner's Drawings (D) represent withdrawals of money by the owner of a business. They decrease owner's equity.

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    Balance Sheet Report

    Financial statement showing a company's assets, liabilities, and owner's equity at a specific point in time.

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    Salaries Expense

    Salaries Expense (E) is an expense incurred by a business for paying salaries. It decreases owner's equity.

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    Owner's Equity

    Owner's equity represents the owner's stake or investment in the business.

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    Statement of Cash Flows

    Financial statement summarizing the cash inflows and outflows of a business over a specific period.

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    Expense

    An expense refers to a cost incurred in the running of a business; it decreases the owner's equity.

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    Cash

    Money a company has available to spend; reported on both balance sheet and statement of cash flows.

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    Notes Payable

    A liability representing a loan borrowed by the business.

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    Cost of renting property

    An expense representing the cost of using the property for business.

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    General Purpose Financial Statements

    Financial reports designed to meet the broad information needs of various users without requiring customized reports for each individual.

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    Information Needs

    The specific data required by users of financial statements.

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    User Diversity

    Financial statements must cater to a variety of users with diverse needs.

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    Going Concern Assumption

    Financial statements are prepared assuming the business will continue operating for the foreseeable future.

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    Liquidation Value

    Estimated value of assets if the business was sold or closed.

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    Financial Statements

    Reports summarizing a business's financial position and performance.

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    Entity Sale/Liquidation

    Management plan to sell or close down the business.

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    Study Notes

    Principles of Accounting I - Brief Contents

    • Chapter 1: Accounting Information and Decision Making (page 3)
    • Chapter 2: The Recording Process (page 56)
    • Chapter 3: Adjusting the Accounts (page 116)
    • Chapter 4: Completing the Accounting Cycle - Closing and Correcting Entries (page 165)

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    Principles of Accounting I PDF

    Description

    Test your knowledge on accounting principles and financial statements with this comprehensive quiz. Questions cover owner's equity, cash flow, and classifications of different categories in accounting. Perfect for students of accounting or finance looking to reinforce their understanding.

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