Accounting Chapter 1-True/False
A transaction for the sale of goods or services results in a decrease in owner's equity
F
If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance.
F
Recording business costs in terms of hours required to complete projects is an application of the unit of measurement concept.
F
The accounting equation does not have to be in balance to be correct.
F
The accounting equation is most often stated as: Assets + Liabilities = Owner's Equity.
F
The capital account is the owner's liability account.
F
The sum of the assets and liabilities of a business always equal the investment of the business owner.
F
Total assets are the amount the owner has invested in the business.
F
When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage.
F
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.
F
When cash is paid for expenses, the business has more equity.
F
When cash is paid on account, a liability is increased.
F
A sale for which cash will be received at a later date is called a charge sale.
T
A withdrawal decreases owner's equity.
T
Accounting is the language of business.
T
After each transaction, the accounting equation must remain in balance.
T
An expense is a decrease in owner's equity resulting from the operation of a business.
T
Assets such as cash and supplies have value because they can be used to acquire other assets or be used to operate a business.
T
Detailed information about changes in owner's equity is needed by owners and managers to make sound business decisions.
T
Keeping personal and business records separate is an application of the business entity concept.
T
The accounting concept Realization of Revenue is applied when revenue is recorded at the time goods or services are sold.
T
The capital account is an owner's equity account.
T
The relationship among assets, liabilities, and owner's equity can be written as an equation.
T
When an owner withdraws cash from the business, the transaction affects both assets and owner's equity.
T
When cash is received from a sale, the total amount of both assets and owner's equity is increased.
T
When financial records for a business and for its owner's personal belongings are not mixed, this is an application of the Business Entity accounting concepts.
T
When items are bought and paid for later this is referred to as buying on account.
T
When two assets accounts are changed in a transaction, there must be an increase and a decrease.
T
Withdrawals are assets taken out of a business for the owner's personal use.
T