7. The accounting equation can be stated as: a) Assets = non-owner's equity + equity. b) Liabilities = assets - equity. c) Assets = liabilities + equity. d) Equity = assets - liabilities. e) All of these answers are correct. 8. A debit is used to record: a) An increase in a liability account. b) A decrease in an asset account. c) A decrease in the withdrawals account. d) An increase in an asset account. e) An increase in a revenue account. 9. An asset created by a payment for economic benefits that do not expire until some later time is: a) Recorded as a debit to an unearned revenue account. Recorded as a debit to a prepaid expense account. Recorded as a credit to an unearned revenue account. Recorded as a credit to a prepaid expense account. d) e) Not recorded in the accounting records. b) c) 10. The current ratio: a) Is used to measure a company's profitability. b) Is used to measure the relationship between assets and long-term debt. c) Measures the effect of operating income on profit. d) Is used to evaluate a company's ability to pay its short-term obligations. e) Only relates to long term liabilities. 11. The current ratio: a) Is current assets divided by current liabilities b) Helps to assess a company's ability to pay its debts in the near future c) Suggests there may be problems in a business if it is less than 1. d) Is a measure of a company's liquidity. e) All of these answers are correct.

7. The accounting equation can be stated as: a) Assets = non-owner's equity + equity. b) Liabilities = assets - equity. c) Assets = liabilities + equity. d) Equity = assets - liabilities. e) All of these answers are correct. 8. A debit is used to record: a) An increase in a liability account. b) A decrease in an asset account. c) A decrease in the withdrawals account. d) An increase in an asset account. e) An increase in a revenue account. 9. An asset created by a payment for economic benefits that do not expire until some later time is: a) Recorded as a debit to an unearned revenue account. b) Recorded as a debit to a prepaid expense account. c) Recorded as a credit to an unearned revenue account. d) Recorded as a credit to a prepaid expense account. e) Not recorded in the accounting records. 10. The current ratio: a) Is used to measure a company's profitability. b) Is used to measure the relationship between assets and long-term debt. c) Measures the effect of operating income on profit. d) Is used to evaluate a company's ability to pay its short-term obligations. e) Only relates to long term liabilities. 11. The current ratio: a) Is current assets divided by current liabilities b) Helps to assess a company's ability to pay its debts in the near future c) Suggests there may be problems in a business if it is less than 1 . d) Is a measure of a company's liquidity. e) All of these answers are correct