Financial Accounting Quiz: Multiple Choice Questions for – Chapter 3, Week 2

Summary

Financial accounting is about recording and reporting a business's financial activities. Students get practice with multiple choice questions on stockholders' equity, liabilities, assets and transactions.

Stockholders' equity and transactions

Stockholders' equity is increased by revenues, not by dividends, expenses or liabilities. Transactions are described that increase or decrease assets, liabilities and stockholders' equity.

Effects of transactions on accounts

Transactions are described that affect assets, liabilities and stockholders' equity. Changes to accounts receivable, services rendered and expenses paid are described.

Revenues, expenses and dividends

Revenues increase assets and stockholders' equity. Expenses decrease stockholders' equity. Dividends decrease assets and stockholders' equity.

Effects of transactions on financial statements

Transactions are described that affect the balance sheet, income statement and retained earnings statement. The effects of buying a machine on credit are described.

Key terms

Stockholders' equity

The value of a business that belongs to its owners.

Liabilities

The amounts a business owes to others.

Assets

The things a business owns that have value.

Transactions

The financial activities that change a business's assets, liabilities and stockholders' equity.

Revenues

The amounts a business earns from selling goods or services.

Expenses

The amounts a business spends to earn revenues.

Questions this document helps with

• How do transactions affect stockholders' equity?
• How do revenues and expenses affect financial statements?
• What happens to assets and liabilities when a business buys something on credit?

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