Chapter 1 True or False Flashcards
Accounting is the language of business.
True
Keeping personal and business records separate is an application of the business entity concept.
True
Assests such as cash and supplies have value because they can be used to acquire other assets or be used to operate a business.
True
The relationship among assets, liabilities, and owner’s equity can be written as an equation.
True
The accounting equation does not have to be in balance to be correct.
False
The sum of the assets and liabilities of a business always equals the investment of the business owner.
False
Recording business costs in terms of hours required to complete projects is an application of the unit of measurement concept.
False
The capital account is an owner’s equity account.
True
If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance.
False
When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage.
False
When items are bought and paid for this is referred to as buying on account.
True
When cash is paid on account, a liability is increased.
False
When cash is received from a sale, the total amount of both assets and owner’s equity is increased.
True
The accounting concept Realization of Revenue is applied when revenue is recorded at the time goods or services are sold.
True
A sale for which cash will be received at a later date is called a charge sale.
True
