USAT Accounting MCQs

Liability accounts normally have credit balances.
Credits increase liabilities, while debits decrease them.

Double entry preserves the accounting equation.
Total debits must equal total credits for each journal entry.

The accounting equation shows how resources are financed.
Every transaction must preserve the equality of assets with liabilities plus equity.

The statement of financial position presents the entity's financial position at a point in time.
It is also commonly called the balance sheet.

The income statement measures financial performance over a period.
Profit equals revenue minus expenses.

The cash flow statement explains changes in cash and cash equivalents.
It separates operating, investing, and financing cash movements.

An asset is a resource expected to provide economic benefits.
Control, rather than legal ownership alone, is central.

A liability requires the entity to transfer an economic resource.
It results from a past transaction or event.

Equity is the owners' residual claim on net assets.
It increases through investment and profit and decreases through withdrawals and losses.

Asset accounts such as cash normally carry debit balances.
Debits increase assets, while credits decrease them.