Site MapHelpFeedbackTrue or False
True or False
(See related pages)

1
Financial statements do not always cover a period of one year.
A)True
B)False
2
The terms balance sheet and statement of financial position are synonymous terms.
A)True
B)False
3
The financial statement that summarizes the assets, liabilities, and owners' equity of an enterprise at a point in time is called a statement of cash flows.
A)True
B)False
4
The payment of a debt results in a negative cash flow.
A)True
B)False
5
If assets total $300,000 and owners' equity totals $100,000, then total liabilities must be $200,000.
A)True
B)False
6
Owners' equity is divided into three parts.
A)True
B)False
7
Consider the following:

Assets$300,000
Liabilities$90,000
Capital stock$120,000

The dollar amount of retained earnings is $70,000.

A)True
B)False
8
Capital stock and the dollar amount of capital stock would be shown first on a balance sheet.
A)True
B)False
9
The business entity principle is based on the notion that the owners are separate and distinct from the business.
A)True
B)False
10
A toy store, restaurant, shoe store, and a computer repair shop are examples of an economic unit called a business entity.
A)True
B)False
11
Economic resources owned by an entity are called assets.
A)True
B)False
12
Assets are always in some physical or tangible form.
A)True
B)False
13
If you purchase equipment at a bargain price and record the purchase of the equipment at the amount of cash used to pay for it, rather than its current market value, you are complying with a widely used principle of accounting for assets known as the cost principle.
A)True
B)False
14
Using cash receipts and mortgage notes as the basis for the valuation of assets is an adherence to the objectivity principle.
A)True
B)False
15
Amounts receivable from customers are usually reported in the balance sheet at their face value.
A)True
B)False
16
Listing assets in the balance sheet at their cost, rather than their current market value, is adhering to the going-concern assumption.
A)True
B)False
17
A decline in the general price level, resulting in an increase in the purchasing power of the monetary unit, is called inflation.
A)True
B)False
18
The stable-dollar assumption is an assumption by accountants that the monetary unit used in the preparation of financial statements is stable over time or changes at a sufficiently slow rate that the resulting impact on financial statements does not distort the information presented.
A)True
B)False
19
Accounts payable and notes payable are called liabilities.
A)True
B)False
20
Liabilities may represent accrued expenses.
A)True
B)False
21
A creditor is a person or organization to which debt is owed.
A)True
B)False
22
If assets total $480,000 and liabilities total $340,000, the owners' equity is $820,000 (=$480,000 + $340,000).
A)True
B)False
23
Owners' equity is a secondary claim to the enterprise's assets.
A)True
B)False
24
There are two sources for increasing owners' equity.
A)True
B)False
25
There are three causes of decreases in owner's equity.
A)True
B)False
26
The accounting equation can be expressed as: assets equal the sum of liabilities plus owners' equity.
A)True
B)False
27
Purchasing an asset for cash will increase owners' equity.
A)True
B)False
28
Purchasing land for $80,000 by making a down payment of 20% of the purchase price and issuing a note payable for the balance will decrease owners' equity.
A)True
B)False
29
Purchasing a $12,000 asset on account does not affect owners' equity.
A)True
B)False
30
The sale of an asset, at its cost, will not change owners' equity.
A)True
B)False
31
The payment of a $5,000 liability will change owners' equity, but the collection of a $3,000 account receivable will not change owners' equity.
A)True
B)False
32
The recording of revenues will increase owners' equity.
A)True
B)False
33
The sale of truck for $5,000 to a competitor who promises to pay the amount in 60 days will change total assets. Assume that the sales price is equal to the truck's cost.
A)True
B)False
34
When a customer pays $3,000 for bookkeeping services, owners' equity increases.
A)True
B)False
35
When the company pays a utilities expense of $2,000, owner's equity decreases.
A)True
B)False
36
The balance sheet is an expansion of the accounting equation.
A)True
B)False
37
The income statement is a summary of the company's revenue and expense transactions for a period of time.
A)True
B)False
38
Increases in the enterprise's assets as a result of profit-oriented activities are called sales.
A)True
B)False
39
A current reduction in cash required to generate revenues is called an expense.
A)True
B)False
40
A major category in the statement of cash flows that reflects the results of debt and equity financing transactions is called operating activities.
A)True
B)False
41
Cash flows from investing activities are the cash effects of purchasing and selling assets.
A)True
B)False
42
The purchase of land, buildings, and equipment are investing activities.
A)True
B)False
43
The purchase of land through the issuance of a mortgage note is classified as an investing activity in the statement of cash flows.
A)True
B)False
44
Articulation is the close relationship that exists among the financial statements that are prepared on the basis of the same underlying transaction information.
A)True
B)False
45
The dollar amount of net income ties the income statement to the balance sheet.
A)True
B)False
46
The ending cash balance in the statement of cash flows ties the statement of cash flows to the income statement.
A)True
B)False
47
Assets that are either cash or will soon become cash are sometimes referred to as current assets.
A)True
B)False
48
A company with total current assets of $45,000 and total current liabilities of $15,000 has a current ratio of 3.
A)True
B)False
49
A company with total current assets of $20,000 and total current liabilities of $50,000 has a current ratio of 2.5.
A)True
B)False
50
One of the major disadvantages of the sole proprietorship form of business is the unlimited liability feature.
A)True
B)False
51
The accounting viewpoint and the legal viewpoint of the sole proprietorship as a business entity are identical.
A)True
B)False
52
A partnership is a form of business ownership in which, among other criteria, two or more persons voluntarily associate for purposes of carrying out business activities.
A)True
B)False
53
A business organized as a separate legal entity and chartered by a state, with ownership divided into transferable shares of capital stock, is called a corporation.
A)True
B)False
54
Transferable units of ownership in a corporation are called capital stock.
A)True
B)False
55
An advantage to the corporate form of business ownership is limited liability.
A)True
B)False
56
The portion of owners' equity (stockholders' equity) that has accumulated as a result of profitable operations is called retained earnings.
A)True
B)False
57
Having the financial ability to pay debts as they become due is called liquidity.
A)True
B)False
58
The ability of a business to pay its debts as they come due is referred to as profitability.
A)True
B)False
59
A company with cash of $23,000, a building that cost $60,000, and liabilities requiring payment of $45,000 in the near future, would have a relatively high evaluation as to short-term liquidity.
A)True
B)False
60
A note to the financial statements describes the uninsured loss to a major portion of the company's manufacturing processes due to a natural disaster. The note to the financial statements is in compliance with an accounting principle called disclosure.
A)True
B)False
61
Delaying large cash outflows for assets until a subsequent accounting period, so as to draw attention to a large amount of cash at the end of the current period, is an action that is sometimes called window dressing.
A)True
B)False





To learn more about the book this website supports, please visit its Information Center.
(c)2008 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Notice.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


Financial & Managerial AcctingOnline Learning Center

Home > Chapter 2 > True or False