1. Which of the following decreases owners equity?

a. losses

b. investments by owners

c. gains

d. short-term loans

2. Which financial statement shows the financial performance of the company on a cash basis?

a. income statement

b. statement of cash flows

c. statement of owners equity

d. balance sheet

3. Assume a company has a $350 credit (not cash) sale. How would the transaction appear if the business uses accrual accounting?

a. $350 would show up on the statement of cash flows as a cash outflow.

b. $350 would show up on the income statement as a sale.

c. $350 would show up on the balance sheet as a sale.

d. The transaction would not be reported because the cash was not exchanged.

4. Which of the following is not an element of the financial statements?

a. liabilities

b. future potential sales price of inventory

c. assets

d. equity