An expense has what effect on the accounting equation?

A) Decrease liabilities.

B) Decrease stockholders' equity.

C) Increase assets.

D) No effect.

Answer: B

Revenues have what effect on the accounting equation?

A) Increase liabilities.

B) Decrease assets.

C) Increase stockholders' equity.

D) No effect.

Answer: C

Investments by stockholders have what effect on the accounting equation?

A) Assets increase and liabilities increase.

B) Expenses increase and liabilities increase.

C) Assets increase and revenues increase.

D) Assets increase and stockholders' equity increases.

Answer: D

Which of the following is not possible when recording a transaction?

A) Liabilities increase and assets decrease.

B) Stockholders' equity increases and assets increase.

C) One asset increases and another asset decreases.

D) Stockholders' equity decreases and assets decrease.

Answer: A

Pumpkin Inc. sold $500 in pumpkins to a customer on account on January 1. On January 11, Pumpkin collected the cash from that customer

Pumpkin Inc. sold $500 in pumpkins to a customer on account on January 1. On January 11, Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash?

A) No net effect to the accounting equation.

B) Decrease assets and increase liabilities.

C) Increase assets and increase liabilities.

D) Decrease assets and decrease liabilities.

Answer: A

A company receives a $50,000 cash deposit from a customer on October 15, but will not provide services until November 20. Which of the following statements is true?

A) The company records service revenue on October 15.

B) The company records cash collection on November 20.

C) The company records deferred revenue on October 15.

D) The company records nothing on October 15.

Answer: C

Which of the following would increase assets and increase liabilities?

A) Provide services to customers on account.

B) Purchase office supplies on account.

C) Pay dividends to stockholders.

D) Receive a utility bill for the current month. Plan to pay bill beginning of next month.

Answer: B

When the company pays stockholders a dividend, what is the effect on the accounting equation for that company?

A) Decrease stockholders' equity and increase assets.

B) Increase liabilities and increase assets.

C) Decrease assets and decrease liabilities.

D) Decrease assets and decrease stockholders' equity.

Answer: D

Receiving cash from customers before services are performed results in:

A) Prepaid Assets.

B) Service Revenue.

C) Deferred Revenues.

D) Accounts Receivable.

Answer: C

Receiving cash from an account receivable:

A) Increases revenue and decreases an asset.

B) Decreases a liability and increases an asset.

C) Increases an asset and increases revenue.

D) Increases one asset and decreases another asset.

Answer: D

A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

a. Retained Earnings.
b. a paid-in capital account.
c. Accumulated Depletion.
d. Accumulated Depreciation.


Answer: a paid-in capital account.