1. A properly done journal entry includes which of the following?

Debits minus credits equal assets

The dollar amount of debits must equal the dollar amount of credits

The number of debits must equal the number of credits

Debits minus credits must equal profits

2. As the owner of a small, specialty toy store, you have decided to implement a new inventory control software system to help you better manage the stock you have on hand, as well as the stock that needs to be reordered. The cost of this system is approximately $2000 a month. Your yearly sales figures total just over $10,000. Is the new inventory software cost-effective?

• No, the benefits outweigh the costs.
• Yes, the benefits outweigh the costs.
• Yes, the costs outweigh the benefits.
• No, the costs outweigh the benefits.

3. You are the owner of a small, but successful, local bookstore that sells both new and used books. You have recently placed an order with one of your book suppliers for $3567.00. According to double-entry accounting, two or more of your accounts will be affected by this transaction. Which of your accounts is affected and how?

• The asset account affected is cash, which will have a balance decrease; the liability account affected is accounts payable, which will have a balance decrease.
• The asset account affected is inventory, which will have a balance decrease; the liability account affected is accounts payable, which will also have a balance decrease.
• The asset account affected is inventory, which will have a balance increase; the liability account affected is accounts payable, which will also have a balance increase.
• The asset account affected is cash, which will have a balance increase; the liability account affected is accounts payable, which will have a balance increase.

4. You are the owner of a small, but successful, local bookstore that sells both new and used books. You lease the building in which your store is located, and own all of the current inventory as well as the bookshelves, cash registers, etc. During the previous year, your assets equaled $57,000, your liabilities were $29,000, your revenue was $65,000, your expenses were $24,000, and you paid a total of $13,000 in dividends to your investors. Are your finances balanced?

• $57,000 = $57,000; yes, my finances are balanced
• There is not enough information provided to determine the answer to this question.
• $57,000 < $131,000; no, my finances are not balanced
• I have no idea.

5. When should liability contingencies be reported?

• when the business knows for sure that the liability is going to happen
• only after the liability has occurred
• only after the liability has occurred, and has been paid for in full
• when the business knows that the liability is likely to happen