If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much?

A) $34,000 increase.

B) $55,000 increase.

C) $34,000 decrease.

D) $76,000 increase.

Answer: A

Which of the following transactions would cause an increase in both the assets and liabilities of a company?

A) Pay for the current month's rent.

B) Pay for inventory purchased 90 days ago.

C) Purchase a building by issuing a note payable.

D) Provide services on account.

Answer: C

When a company pays cash for equipment, what is the effect on the accounting equation for that company?

A) Increase assets and increase liabilities.

B) Decrease assets and decrease liabilities.

C) No net change.

D) Increase assets and increase stockholders' equity.

Answer: C

"Record revenue when goods or services are provided to customers" is the definition of which principle in accounting?

A) Trial balance.

B) Debits and credits.

C) Revenue recognition.

D) Accounting equation.

Answer: C

Which of the following is NOT possible for a business transaction?

A) Increase assets and decrease revenue.

B) Decrease assets and increase expenses.

C) Increase liabilities and increase expenses.

D) Decrease liabilities and increase revenue.

Answer: A

Which of the following transactions would cause a decrease in both assets and stockholders' equity?

A) Paying insurance premium for the next two years.

B) Purchasing office equipment on account.

C) Paying advertising for the current month.

D) Providing services to customers on account.

Answer: C

When a company issues common stock for cash, what is the effect on the accounting equation for the company?

A) Assets increase and liabilities increase.

B) Assets increase and stockholders' equity increases.

C) Assets decrease and liabilities decrease.

D) Liabilities decrease and stockholders' equity increases.

Answer: B