1. A business is considered solvent whenever: a. Its assets exceed its liabilities b. It is profitable c. It has been audited by a firm of CPAs. d. It has sufficient cash to pay its debts as they fall due.

2. In a ledger, credit entries cause: a. Increases in owners equity, decreases in liabilities, and increases in assets. b. Decreases in liabilities, increases in assets, and decreases in owners equity. c. Decreases in assets, decreases in liabilities, and increases in owners equity. d. Decreases in assets, increases in liabilities, and increases in owners equity.

3. The essential point of double-entry system of accounting is that every transaction: a. Affects two or more ledger accounts and is recorded by an equal dollar amount of debits and credits. b. Affects accounts on both sides of the balance sheet c. Is recorded in both the cash flows statement and balance sheet. d. Increases one ledger account and decreases another.

4. The journal entry to record a particular business transaction includes a debit to a liability account. This transaction is most likely also to include: a. A cash receipts b. The purchase of an asset on account c. A cash payment d. A withdrawal by the owner

Liabilities are : a. Are future economic benefits. b. Are existing debts and obligations. c. Possess service potential. d. Are things of value used by the business in its operation.

6. Revenues are: a. The cost of assets consumed during the period. b. Actual or expected cash outflows. c. Gross increases in owners equity resulting from business activities. d. The cost of services used during the period.

7. A credit is not the normal balance for which account listed below? a. Capital account. b. Revenue account. c. Liability account. d. Drawing account.

8. If a company has overdrawn its bank balance, then: a. Its bank account will show a credit balance. b. Its bank account will show a debit balance. c. The bank account debits will exceed the bank account credits. d. It cannot be detected by observing the balance of the bank account.

9. Transactions in a journal are initially recorded in: a. Account number order b. Dollar amount order c. Alphabetical order. d. Chronological order.

10. The procedure of transferring journal entries to the ledger accounts is called: a. Journalising. b. Analysing. c. Posting. d. Reporting.