True/False
Indicate whether the
statement is true or false.
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1.
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The objecitve of most businesses is to maximize profits.
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2.
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A partnership is owned by two or more individuals.
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3.
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Manuafacturing businesses produce products rather than provide services to
customers.
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4.
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The popularity of the sole proprietorship is due to the ease and low cost of
organizing.
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5.
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Stockholders of a corporation are its internal stakeholders.
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6.
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The basic elements of a financial accounting system includes framework for
preparing financial statements.
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7.
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The accounting equation is expressed as follow:
Assets+Liabilities+Stockholders’ Equity.
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8.
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Any given transaction must affect at least two differnet parts of he accounting
equation.
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9.
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The accounting equation can be expressed as: Assets-Liabilities=Revenues
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10.
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On a statement of cash flows, each cash transaction is recorded and classified
as an operating, investing, or financing activity.
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11.
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Receiving cash in advance of performing a service creates a liability for the
company.
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12.
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The accrual basis recognizes liabilities at the time the business incurs the
obligation to pay for the services or goods
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13.
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The accrual basis of accounting requires revenue to be recorded when the service
is performed.
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14.
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Accrual accounting does not require that the accounting records be updated prior
to preparing financial statements
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15.
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The revenue recognition concept states that revenue should be recorded in the
same period as the cash is reveived.
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16.
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Operating expenses are subtracted from fees earned for a service business and
from gross profit for a merchandising business.
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17.
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Net sales is equal to sales plus cost of merchandise sold.
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18.
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The merchandise inventory account is found on the balance sheet.
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19.
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Net income or loss may appear on the income statement of both a service busniess
and a retail business.
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20.
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It is usual for the credit period to begin with the date the merchandise is
received by the buyer.
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