6 Which of the following events is not a business transaction? a. Investment of

Question

6 Which of the following events is not a business transaction? a. Investment of cash by the owner. b. Hired employees. c. Incurred utility expenses for the month. d. Earned revenue for services provided. 7. Owner's equity is often referred to as a. residual equity b. leftovers. c. spoils d. second equity. 8. Liabilities are future economic benefits. b. a. are existing debts and obligations. possess service potential. c. d. are things of value used by the business in its operation. 9. The fair value principle is applied for a all assets and liabilities b. only current assets c. buildings d. only liabilities 10. Financial information that is capable of making a difference in a decision is a faithfully representative. b. relevant e convergent d. generally accepted 11. The uneamed revenue adjusting entry for $5.000 was et posted. What impact will this have on the financial statement? a. Asset and Expenses will be overstated b. Revenue and Owner's Equity will be understated. c. Owner's Equity will be overstated. d. Liabilities and Expenses will be understated. 12. Which one of the following could represent the expanded basic accounting equation? a. Assets Liabilities + Owner's Capital+ Owner's Drawings-Revenue-Expenses. b. Assets+Owner's Drawings+ Expenses Liabilities+ Owner's Capital+ Revenues. c. Assets-Liabilities-Owner's Drawings Owner's Capital +Revenues-Expenses. d. Assets Revenues +Expenses-Liabilities. 13. After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to a. the company's bank. b. owner's equity c. ledger accounts. d. financial statements. ACCOUNTING 101 SPRING 2018 PAGE |2

Explanation / Answer

6. (b)     Hired employees is not a business transaction as there is no financial impact at that time.

7. (a)     Owners equity is also called as net income and Residual equity.

8. (b)     Liabilities are defined as creditors , claims on total assets and as existing debts and obligations.

12. (b)   Assets + Owner's Drawings + Expenses = Liabilities + Revenues + Owner's Capital

13. (c)   Ledger accounts

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