Question

1. Which of the following is something of value owned by the company?
(a)Cash (b) Common Stock (c) Supplies Expense (d) Notes Payable

2. Windward Inc. makes a payment of $500 on its accounts payable. How does this effect the accounting equation?
a. Assets decrease and Liabilities decrease

b. Assets increase and Equity Decreases

c. Assets decrease and Equity decreases

d. Assets increase and Liabilities increase

e. Assets decrease and Liabilities increase

3. Chitron Corporation earns $750 working for a client and gets paid cash. How does this effect the accounting equation?
a. Assets increase and Equity decreases

b. Assets decrease and Equity decreases

c. Assets decrease and Liabilities decrease

d. Assets increase and Liabilities increase

e. Assets increase and Equity increases

4. Dewey Corporation pays $250 for this months electric bill. How does this effect the accounting equation?
a. Assets increase and Liabilities increase

b. Assets decrease and Liabilities decrease

c. Assets decrease and Equity decreases

d. Assets decrease and Liabilities increases

e. Assets increase and Equity decreases

5. Binder Company pays a $2,000 dividend to its owners. How does this affect the accounting equation?
a. Assets decrease and Equity decreases

b. Assets decrease and Liabilities increases

c. Assets decrease and Liabilities decrease

d. Assets increase and Liabilities increase

e. Assets increase and Equity decreases

6. Framer Company does $3,000 of work for a customer on account. How does this affect the accounting equation?
a. Assets increase and Liabilities increase

b. Assets decrease and Equity decreases

c. Assets decrease and Liabilities decrease

d. Assets increase and Equity increases

e. Assets decrease and Equity increases

7. Than Corporation collects $1,700 owed to it from a client. How does this affect the accounting equation?
a. Assets decrease and Equity increases

b. Assets increase and Liabilities increase

c. Assets increase and Equity increases

d. Total Assets, Liabilities, and Equity are unchanged

e. Assets decrease and Liabilities decrease

8. Tagit Corporation purchases $725 of supplies on account. How does this affect the accounting equation?
a. Total Assets, Liabilities, and Equity are unchanged

b. Assets decrease and Liabilities decrease

c. Assets increase and Liabilities increase

d. Assets decrease and Equity increases

e. Assets increase and Equity increases

Answer 1

Ans 1 A

Reason

Cash is an asset and asset is valuable.

Ans 2

a. Assets decrease and Liabilities decrease

Reason

Wehenwe pay the liability our assets either cash or bank decreases.

When we pay the liabilities then liabilities decreases.

Ans 3 e. Assets increase and Equity increases

Reason

Earning anything will increase revenue. Increasing revenue will increase profit and increase Equity.

Also, revenue will affect asset side too either in the form of cash or either account receivable.

Ans 4 b. Assets decrease and Liabilities decrease

We are paying therefore, asset will decrease.

Electricity bill was in liability. After paying electricity bill our liablliab also decreases.

Ans 5 a. Assets decrease and Equity decreases

Reason:-

Dividend decrease the assets and equity because both assets and equity decreases.

And 6 d. Assets increase and Equity increases

When we provide services on account then it becomes accounts receivable and hence assets increases.

Revenue also increase therefore, equity increase.

Ans 7 d. Total Assets, Liabilities, and Equity are unchanged

Cash will increase and account receivable will decrease. Hence no impact on assets .

Ans 8 c. Assets increase and Liabilities increase

Reason

Assets increase because supplies are assets .

Liabilities increase because account payable increases.

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