Financing Questions

True / False Questions

1. Accounting is a system that collects and processes financial information about an organization and reports that information to decision makers.
TRUE

AACSB Tag: Communications
Difficulty: Easy
L.O.: 1

2. Assets on the balance sheet are recorded at market value or replacement cost.
FALSE

AACSB Tag: Reflective Thinking
Difficulty: Easy
L.O.: 1

3. In accounting and reporting for a business entity, the accounting and reporting for the business must be kept separate from other economic affairs of its owners.
TRUE

AACSB Tag: Reflective Thinking
Difficulty: Easy
L.O.: 1

4. The accounting period in which service revenue is recognized (i.e., revenue for services rendered) is generally the period in which the cash is collected.
FALSE

AACSB Tag: Reflective Thinking
Difficulty: Medium
L.O.: 1

5. Total assets are $70,000, total liabilities, $40,000 and contributed capital is $20,000; therefore, retained earnings are $15,000.
FALSE

AACSB Tag: Analytic
Difficulty: Medium
L.O.: 1

6. The payment of a cash dividend to stockholders increases stockholders ' equity.
FALSE

AACSB Tag: Reflective Thinking
Difficulty: Medium
L.O.: 1

7. The accounting model for the balance sheet is: Assets + Liabilities = Stockholders ' Equity.
FALSE

AACSB Tag: Reflective Thinking
Difficulty: Easy
L.O.: 1

8. A decision maker who wants to understand a company 's financial statements must carefully read the notes to the financial statements because the notes provide useful supplemental information.
TRUE

AACSB Tag: Communications
Difficulty: Easy
L.O.: 1

9. The financial statement that shows an entity 's economic resources and its liabilities is the statement of cash flows.
FALSE

AACSB Tag: Reflective Thinking
Difficulty: Medium
L.O.: 1

10. Companies prepare financial statements at the end of each year and more