Answers are provided at the bottom of this document.

Questions

1. All of the following items are considered part of the owner's equity, EXCEPT:
   
   1. capital
   2. drawings
   3. net income
   4. dividends
2. The purpose of a balance sheet is to:
   
   1. show the financial position of the business on a particular date
   2. show the net income for a particular period
   3. show the fair market value of the business on a particular date
   4. summarize all accounting transactions for the year
3. Chris, the owner of a French fry proprietorship, obtains a loan from the bank for a down payment on a cottage. How should this be reflected on the financial statements of Chris's French Fries?
   
   1. asset
   2. liability
   3. asset and liability
   4. none of the above
4. The correct sequence of presentation of items on the income statement is:
   
   1. revenue, expenses, extraordinary items
   2. expenses, revenue, extraordinary items
   3. extraordinary items, revenue, expenses
   4. extraordinary items, expenses, revenue
5. Net income equals:
   
   1. assets - liabilities
   2. liabilities - owner's equity
   3. revenue + expenses
   4. revenue - expenses
6. Financial statements are used by:
   
   1. creditors
   2. tax authorities
   3. investors
   4. all of the above
7. The posting reference in the ledger indicates:
   
   1. the page of the ledger that the account is on
   2. the date of the transaction
   3. whether it is a debit or a credit entry
   4. the page of the journal where the entry can be found

Answers

1. d
2. a
3. d
4. a
5. d
6. d
7. d