ASU ACC232 PRACTICE
EXAM Question 1: Which �nancial statement reports the �nancial position of a company at a speci�c point in time?
Choices:
1) Income Statement 2) Statement of Cash Flows 3) Balance Sheet 4) Statement of Retained Earnings
Correct Answer: Balance Sheet
Explanation: The balance sheet is the only major �nancial statement that reports the �nancial position (assets, liabilities, and equity) at a speci�c point in time, rather than over a period.Page 1
Question 2: If total assets decreased by $15,000 and total liabilities decreased by $5,000 during a period, what was the change in total stockholders' equity?
Choices:
1) Increase of $20,000 2) Decrease of $10,000 3) Decrease of $20,000 4) Increase of $10,000
Correct Answer: Decrease of $10,000
Explanation: Using the accounting equation Assets = Liabilities + Equity: -$15,000 = -$5,000 + Equity. Solving for Equity yields a decrease of $10,000.Question 3: A company purchases o�ce supplies on account for $1,200. How does this transaction a�ect the accounting equation?
Choices:
1) Assets increase and liabilities decrease 2) Assets decrease and equity decreases 3) Assets increase and liabilities increase 4) Assets increase and equity increases
Correct Answer: Assets increase and liabilities increase
Explanation: Purchasing supplies on account increases assets (Supplies) and increases liabilities (Accounts Payable) by $1,200.Page 2
Question 4: Which of the following accounts normally has a debit balance?
Choices:
1) Accounts Payable 2) Common Stock 3) Prepaid Rent 4) Service Revenue
Correct Answer: Prepaid Rent
Explanation: Prepaid Rent is an asset account. Assets normally have debit balances. Liabilities, Equity, and Revenue accounts normally have credit balances.Question 5: Which principle requires that expenses be recognized in the same period as the revenues they help to generate?
Choices:
1) Revenue Recognition Principle 2) Historical Cost Principle 3) Matching Principle 4) Going Concern Assumption
Correct Answer: Matching Principle
Explanation: The matching principle (or expense recognition principle) requires that expenses be recorded in the same period in which the revenues they help generate are recorded.Page 3