1. All of the following are permanent accounts except A. retained earnings. B. interest income. C. prepaid expenses. D. unearned revenue.

2. Accounting information that has been developed primarily for use by external users is referred to as A. financial accounting. B. managerial accounting. C. cost accounting. D. not-for-profit accounting.

3. Shareholder equity is made up of which of the following two components? A. Liabilities and Equity. B. Assets and Equity. C. Share Capital and Retained Earnings. D. Retained Earnings and Liabilities.

4. The ending retained earnings balance in Parker Real Estate increased by $430,000 from the beginning of the year. During the year, Parker Corporation paid a dividend of $150,000. Based on the information provided, what was Parkers net income for the year? A. $580,000 B. $300,000 C. $280,000 D. There is not enough information given to determine net income.

5. The matching principle matches A. creditors with businesses. B. investors with businesses. C. expenses with revenues. D. assets with liabilities. Test One - Questions

6. If a transaction causes an asset account to decrease, which of the following related effects may occur? A. an increase of equal amount in an owners' equity account B. an increase in a liability account C. an increase of equal amount in another asset account D. an increase in the combined total of liabilities and owners' equity

7. If your trial balance has a higher debit balance than credit balance, it signifies A. a loss. B. a profit. C. assets are more than liabilities. D. an error has been made.

8. If an investor wants to know how many liabilities were owed by a corporation, which financial statement would you examine? A. Income statement B. Statement of financial position C. Statement of cash flows D. Statement of retained earnings

9. The collection of cash from a customer on account would A. increase retained earnings and equity. B. increase assets and increase liabilities. C. increase assets and increase equity. D. have no effect on retained earnings or equity.

10. The essential point of the double-entry system of accounting is that every transaction A. affects accounts on both sides of the statement of financial position. B. is recorded in both the journal and the ledger. C. increases one ledger account and decreases another. D. affects two or more ledger accounts and is recorded by an equal dollar amount of debits and credits.