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Financial Accounting Multiple Choice Questions

This document contains a multiple choice quiz on accounting concepts. There are 27 multiple choice questions testing understanding of the basic accounting equation, how different transactions affect assets, liabilities, and owner's equity, and how to calculate unknown values based on the accounting equation. The questions cover topics such as the components of owner's equity, the basic accounting equation, what is and is not included in liabilities, sources of increases and decreases to owner's equity, and how specific transactions would impact the accounting equation.

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Abdalrhman Mahmoud
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21 views36 pages

Financial Accounting Multiple Choice Questions

This document contains a multiple choice quiz on accounting concepts. There are 27 multiple choice questions testing understanding of the basic accounting equation, how different transactions affect assets, liabilities, and owner's equity, and how to calculate unknown values based on the accounting equation. The questions cover topics such as the components of owner's equity, the basic accounting equation, what is and is not included in liabilities, sources of increases and decreases to owner's equity, and how specific transactions would impact the accounting equation.

Uploaded by

Abdalrhman Mahmoud
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

financial Accounting (1)

Section(4)
Professor of course
Dr
Abd El Hameed Shahin
Prepared by
Akram Samy
Nader Torky
MULTIPLE CHOICE
QUESTIONS
Owner's equity is best depicted by
the following:
a. Assets = Liabilities.
b. Liabilities + Assets.
c. Residual equity + Assets.
d. Assets – Liabilities.

Ans: d
The basic accounting equation may be
expressed as
a. Assets = Equities.
b. Assets – Liabilities = Owner's Equity.
c. Assets = Liabilities + Owner's Equity.
d. All of these answer choices are correct..
Ans: d
Liabilities of a company would not
include
a. notes payable.
b. accounts payable.
c. salaries and wages payable.
d. cash.

Ans: d
Liabilities of a company are owed to
a. debtors.
b. benefactors.
c. creditors.
d. underwriters.

Ans: c
Sources of increases to owner's equity are
a. additional investments by owners.
b. purchases of merchandise.
c. withdrawals by the owner.
d. expenses.

Ans: a
The basic accounting equation cannot be
restated as
a. Assets – Liabilities = Owner's Equity.
b. Assets – Owner's Equity = Liabilities.
c. Owner's Equity + Liabilities = Assets.
d. Assets + Liabilities = Owner's Equity.

Ans: d
Owner's equity is decreased by all of the
following except
a. owner's investments.
b. owner's withdrawals.
c. expenses.
d. owner's drawings.
• Ans: a
A net loss will result during a time period
when
a. liabilities exceed assets.
b. drawings exceed investments.
c. expenses exceed revenues.
d. revenues exceed expenses.
Ans: c
If total liabilities decreased by €40,000 and owner’s
equity increased by €30,000 during a period of time,
then total assets must change by what amount and
direction during that same period?

A= LI + OE
A=-40.000+30.000
A=-10.000
If total liabilities decreased by €40,000 and owner’s
equity increased by €30,000 during a period of time,
then total assets must change by what amount and
direction during that same period?

a. €50,000 decrease
b. €10,000 decrease
c. €10,000 increase
d. €50,000 increase

Ans: b
If total liabilities decreased by €40,000 and owner’s
equity increased by €30,000 during a period of time,
then total assets must change by what amount and
direction during that same period?

A= LI + OE
A=-40.000-30.000
A=-70.000
If total liabilities decreased by €40,000 and owner’s
equity decreased by €30,000 during a period of time,
then total assets must change by what amount and
direction during that same period?
a. €70,000 decrease
b. €10,000 decrease
c. €10,000 increase
d. €70,000 increase

Ans: a
If total liabilities decreased by HK$600,000 and
owner’s equity increased by HK$300,000 during a
period of time, then total assets must change by what
amount and direction during that same period?

A= LI + OE
A=-600.000+300.000
A=-300.000
If total liabilities decreased by HK$600,000 and
owner’s equity increased by HK$300,000 during a
period of time, then total assets must change by what
amount and direction during that same period?

a. HK$900,000 decrease
b. HK$300,000 decrease
c. HK$300,000 increase
d. HK$900,000 increase
Ans: b
If total liabilities decreased by €30,000 and owner’s
equity decreased by €15,000 during a period of time, then
total assets must change by what amount and direction
during that same period?

A= LI + OE
A=-30.000-15.000
A=-45.000
If total liabilities decreased by €30,000 and owner’s
equity decreased by €15,000 during a period of time, then
total assets must change by what amount and direction
during that same period?
a. €45,000 decrease
b. €15,000 decrease
c. €15,000 increase
d. €45,000 increase

Ans: a
If total liabilities increased by ¥900,000 during a
period of time and owner’s equity decreased by
¥2,500,000 during the same period, then the amount
and direction (increase or decrease) of the period’s
change in total assets is a(n)

A= LI + OE
A=+900.000-2.500.000
A=-1.600.000
If total liabilities increased by ¥900,000 during a
period of time and owner’s equity decreased by
¥2,500,000 during the same period, then the amount
and direction (increase or decrease) of the period’s
change in total assets is a(n)
a. ¥3,400,000 decrease.
b. ¥1,600,000 decrease.
c. ¥1,600,000 increase.
d. ¥3,400,000 increase.

Ans: b
The accounting equation for Cineo Eyewear is as
follows:
Assets Liabilities Owner’s Equity
£120,000 = £60,000 + £60,000
If Cineo purchases office equipment on account for
£15,000, the accounting equation will change to
A= LI + OE
120.000=60.000+60.000
(120.000+15.000)= (60.000+15.000) +60.000
135.000=75.000+60.000
The accounting equation for Cineo Eyewear is as
follows:
Assets Liabilities Owner’s Equity
£120,000 = £60,000 + £60,000
If Cineo purchases office equipment on account for
£15,000, the accounting equation will change to
Assets Liabilities Owner’s Equity
a. £120,000 = £60,000 + £60,000
b. £135,000 = £60,000 + £75,000
c. £135,000 = £67,500 + £67,500
d. £135,000 = £75,000 + £60,000

Ans: d
As of June 30, 2020, Little Giantz Company has assets
of $100,000 and owner’s equity of $60,000. What are the
liabilities for Little Giantz Company as of June 30, 2020?

A= LI + OE
100.000= LI +60.000
100.000-60.000= LI
LI=40.000
As of June 30, 2020, Little Giantz Company has assets
of $100,000 and owner’s equity of $60,000. What are the
liabilities for Little Giantz Company as of June 30, 2020?

a. $40,000
b. $60,000
c. $100,000
d. $160,000
Ans: a
Owner's equity is increased by
a. drawings.
b. revenues.
c. expenses.
d. liabilities.

Ans: b
23. Owner's equity is decreased by
a. assets.
b. revenues.
c. expenses.
d. liabilities.

Ans: c
If total liabilities increased by €6,000, then

A= LI + OE
A=+6000+OE
If total liabilities increased by €6,000, then
a. assets must have decreased by €6,000.
b. owner's equity must have increased by €6,000.
c. assets must have increased by €6,000, or owner's equity must
have decreased by €6,000.
d. assets and owner's equity each increased by €3,000.
Ans: c
Collection of a $1,500 Accounts Receivable
a. increases an asset $1,500; decreases an asset $1,500.
b. increases an asset $1,500; decreases a liability $1,500.
c. decreases a liability $1,500; increases owner's equity $1,500.
d. decreases an asset $1,500; decreases a liability $1,500.
Ans: a
If an individual asset is increased, then
a. there must be an equal decrease in a specific liability.
b. there must be an equal decrease in owner's equity.
c. there must be an equal decrease in another asset.
d. All of these answer choices are possible.
Ans: c
. If services are rendered for credit, then
a. assets will decrease.
b. liabilities will increase.
c. owner's equity will increase.
d. liabilities will decrease.

Ans: c
If expenses are paid in cash, then
a. assets will increase.
b. liabilities will decrease.
c. owner's equity will increase.
d. assets will decrease.

Ans: d
If an owner makes a withdrawal of cash from
a proprietorship, then
a. there has been a violation of accounting principles.
b. owner's equity will increase.
c. owner's equity will decrease.
d. there will be a new liability showing the owner owes money to
the business.

Ans: c
If supplies that have been purchased are
used in the course of business, then
a. a liability will increase.
b. an asset will increase.
c. owner's equity will decrease.
d. owner's equity will increase.

Ans: c
As of December 31, 2020, Hon Hai Computer has assets
of NT$420,000 and owner's equity of NT$220,000. What
are the liabilities for Hon Hai Computer as of December
31, 2020?
a. NT$220,000.
b. NT$200,000.
c. NT$420,000.
d. NT$640,000.

Ans: b
thank you all

Common questions

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If a company decreases liabilities while increasing equity, the total asset value might decrease if the equity increase is less than the liabilities decrease. This shift could affect financial decisions by altering debt-to-equity ratios, affecting leverage, and potentially impacting investment decisions due to perceived financial stability changes. This assessment requires creative financial strategy considerations, such as asset investment for growth versus maintaining liquidity .

Reporting cash as a liability is problematic because it incorrectly categorizes an asset, potentially leading to a misrepresentation of a company's financial health. While liabilities represent obligations, cash is an asset because it is a resource owned by the company that can be used to settle liabilities and facilitate transactions .

Liabilities can logically be determined by rearranging the basic accounting equation: Liabilities = Assets - Owner's Equity. For instance, if the assets are $100,000 and owner's equity is $60,000, liabilities are calculated as $40,000, which balances the equation Assets = Liabilities + Owner's Equity .

Paying expenses in cash decreases assets, as cash is reduced, and it also decreases owner's equity because expenses reduce net income, which in turn lowers owner's equity .

When liabilities increase by ¥900,000 and owner's equity decreases by ¥2,500,000, total assets decrease by ¥1,600,000. This synthetic adjustment reflects the relationship inherent in the accounting equation: increases in liabilities and decreases in equity both lead to a net decline in asset values .

Providing services on credit increases owner’s equity because it generates revenue without an immediate cash inflow. Revenue increases owner's equity as recorded in net income, which is then added to owner's equity .

A decrease in total liabilities by €40,000 and an increase in owner's equity by €30,000 during a period results in a €10,000 decrease in total assets. This implies that the relationship between liabilities, equity, and assets is governed by the accounting equation Assets = Liabilities + Owner's Equity .

An owner's withdrawal of cash from a business decreases owner's equity because it reduces the net assets available to the business. It signifies a distribution of earned capital back to the owner, thus reducing the overall balance in owner's equity .

When an asset is purchased on account, both the assets and liabilities increase by the amount of the purchase. For example, if office equipment is purchased for £15,000 on account, the accounting equation changes from Assets = £120,000, Liabilities = £60,000, Owner's Equity = £60,000 to Assets = £135,000, Liabilities = £75,000, Owner's Equity = £60,000 .

Owner's equity is calculated as Assets minus Liabilities using the basic accounting equation, which is expressed as Assets = Liabilities + Owner's Equity. Therefore, Owner's Equity = Assets - Liabilities .

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