Q1 True \ False
1) The balance sheet of a business summarizes an entity's revenues and expenses.
2) By looking at a statement of owner's equity, the effect of withdrawals on the
ending balance in owner's equity can be evaluated.
3) Financial statements are business documents that are used to communicate
information needed to make business decisions.
4) The income statement is also called the statement of financial position.
5) The heading of a balance sheet will show the date as a specific date, not a
period of time
Q2 Multiple Choice Questions
6)The following are the current month's balances for Toys Galore
Calculate the total amount of credits for the trial balance.
A) $24,500
B) $22,750
C) $24,750
D) $32,750
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7) The balance of owner's capital at the beginning of the year and the end of the
year was $50,000 and $67,000, respectively. No additional capital was introduced
during the year. Withdrawals were $23,000. What was the net income or loss for
the year?
A) Net income of $90,000
B) Net loss of $90,000
C) Net loss of $40,000
D) Net income of $40,000
8) The net income of Edwards Inc. amounted to $74,000 for this year. The
beginning balance of Owner's Capital account was $32,000 and the ending
balance was $75,000. No additional contributions to capital were made during
the year. What was the amount of his withdrawals during the year?
A) $75,000
B) $31,000
C) $149,000
D) $32,000
9) Financial statements are prepared after an entity's transactions are analyzed
and recorded. Which of the following reports is one of the required financial
statements?
A) Statement of cash flows
B) Statement of return on assets
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C) Statement of withdrawals
D) Expense statement
10) The statement of owner's equity shows the changes in Owner's capital.
Which one of these statements is true?
A) Decreases in Owner's equity result from additional owner investments.
B) Decreases in Owner's equity result from net losses.
C) Decreases in Owner's equity result from net income.
D) Decreases in Owner's equity result from revenues earned.
11) The income statement presents a summary of an entity's revenues and
expenses for a period of time. Which of the following statements is true of an
income statement?
A) There is net income when total revenues are lesser than total expenses.
B) There is a net loss when total expenses are lesser than total revenue.
C) There is a net loss when total expenses are greater than total liabilities.
D) There is net income when total revenues are greater than total expenses.
12) The balance sheet is a snapshot of the entity. Which of the following items
are included on the balance sheet?
A) revenues
B) expenses
C) assets
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D) withdrawals
13) Which of the following items is included in the headings of the financial
statements?
A) date and time of filing tax returns
B) place and time of preparation of the statement
C) name of the preparer of the statement
D) name of the business
14) Which of the following financial statements reports expenses in decreasing
order of their amounts, by stating the largest expense first?
A) statement of cash flows
B) income statement
C) statement of owner's equity
D) balance sheet
15) The amount of net income is transferred from ________ to ________.
A) the income statement; the statement of owner's equity
B) the balance sheet; the statement of cash flow
C) the balance sheet; the income statement
D) the income statement; the statement of expenditures
16) Which of the following financial statements reports that total assets are equal
to total liabilities plus total owner's equity?
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A) statement of owner's equity
B) statement of cash flows
C) income statement
D) balance sheet
17) Which of the following financial statements reports cash receipts and cash
payments during a period of time?
A) statement of cash flows
B) balance sheet
C) cash receipts budget
D) statement of owner's equity
18) Which of the following financial statements reports an increase or decrease
in net cash during the time period covered?
A) income statement
B) statement of owner's equity
C) statement of cash flows
D) cash budget
19) Which of the following is the correct order of preparation of financial
statements?
A) income statement → statement of owner's equity → balance sheet →
statement of cash flows
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B) statement of owner's equity → balance sheet → income statement →
statement of cash flows
C) balance sheet → statement of owner's equity → income statement →
statement of cash flows
D) balance sheet → income statement → statement of owner's equity →
statement of cash flows
20) Which of the following amounts appears on both the income statement and
statement of owner's equity?
A) ending capital
B) total revenues
C) net income
D) withdrawals
(Answers)
Item Ans Item Ans Item Ans Item Ans
1 F 6 D 11 D 16 D
2 T 7 D 12 C 17 A
3 T 8 B 13 D 18 C
4 F 9 A 14 B 19 A
5 T 10 B 15 A 20 C