1. What does the income statement reflect? A) The cash that has flowed into and out of the company over an accounting period B) Revenues minus expenses over an accounting period C) Both of the above D) None of the above * * 2. Which of the following equations is correct? A) Assets = Liabilities + Equity B) Assets + Liabilities = Equity C) Assets = Liabilities - Equity

3. An increase in an asset must always be balanced by an increase in a liability. A) True B) False * * 4. What effect does revenue in the income statement have on balance sheet assets? A) Revenue serves to increase assets B) Revenue serves to reduce assets C) Revenue has no effect on assets

5. The cash flow statement sometimes reflects transactions that appear neither on the income statement nor on the balance sheet. A) True B) False

6. Which of the following statements is true? A) Increases in fixed assets represent a source of cash for a company B) In the income statement, revenue will increase retained earnings, while expenses will serve to reduce retained earnings. C) All transactions that impact the balance sheet also affect the income statement

7. Which of the following statements about the accounting matrix is true? A) Each column in the accounting matrix must balance to zero B) Each row in the accounting matrix must balance C) The final row in the accounting matrix must match the opening row

8. How would a credit sale of 20,000 be shown in the seller's accounting matrix? A) Revenue +20,000, Cash +20,000 B) Accounts Receivable -20,000, Cash +20,000 C) Accounts Receivable +20,000, Inventory -20,000 D) Cash +20,000, Equity +20,000 E) Accounts Receivable +20,000, Equity