Chapter 1 True Or False

Question 1

Accounting is the language of business

Answer 1

True

Question 2

Keeping personal and business records separate is an application of the business entity concept

Answer 2

True

Question 3

Assets such as cash and supplies have value because they can be used to acquire other assets or be used to operate a business

Answer 3

True

Question 4

The relationship among assets, liabilities, and owners equity can be written as an equation

Answer 4

True

Question 5

The accounting equation does not have to be in balance to be correct

Answer 5

False

Question 6

The sum of the assets and liabilities of a business always equal the investment of the business owner

Answer 6

False

Question 7

Recording business costs in terms of hours required to complete projects is an application of the unit of measurement concept

Answer 7

False

Question 8

The capital account is an owners equity account

Answer 8

True

Question 9

If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance

Answer 9

False

Question 10

When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage

Answer 10

False

Question 11

When items are bought and paid for later this is referred to as buying on account

Answer 11

True

Question 12

When cash is paid on account, a liability is increased

Answer 12

False

Question 13

When cash is received from a sale, the total amount of both assets and owners equity is increased

Answer 13

True

Question 14

A sale for which cash will be received at a later date is called a charge sale

Answer 14

True

Question 15

The accounting concept realization of revenue is applied when revenue is recorded at the time goods or services are sold

Answer 15

True

Question 16

When cash is paid for expenses, the business has more equity

Answer 16

False

Question 17

When a company receives cash from a customer for a prior sale, the transaction increases the cash account balance and increases the accounts receivable balance

Answer 17

False

Question 18

A withdrawal decreases owners equity

Answer 18

True