Chapter 1—Asset, Liability, Owner's Equity, Revenue, and Expense Accounts MULTIPLE CHOICE 1. The purchase of an asset (like Equipment) on account will a. increase total liabilities and decrease total assets. b. have no effect on total assets or total liabilities. c. increase total assets and increase total liabilities. d. increase total assets and increase owner's equity. e. increase total assets and decrease owner's equity. ANS: C PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-1 NAT: AACSB: Reflective Thinking STA: AICPA-FN: Measurement|ACBSP: Recording Transactions KEY: Bloom's: Comprehension 2. Amounts owed by a business are referred to as a. assets. b. equities. c. liabilities. d. capital. e. expenses. ANS: C PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-1 NAT: AACSB: Reflective Thinking STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Knowledge 3. Which of the following equations is the fundamental accounting equation? a. Assets − Liabilities = Owner's Equity b. Assets = Liabilities + Owner's Equity c. Assets + Liabilities = Owner's Equity d. Assets − Owner's Equity = Liabilities e. Assets + Owner's Equity = Liabilities ANS: B PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-1 NAT: AACSB: Reflective Thinking STA: AICPA-FN: Measurement|ACBSP: GAAP KEY: Bloom's: Application 4. When an owner deposits cash in an account in the name of the business, it is an increase to a. Cash and Accounts Receiv