Chapter 1 Review Questions True-False Statements

Accounting communicates financial information about a business to both internal and external users.

True

Assets are resources owned by a business and provide future services or benefits to the business.

True

Corporate stockholder generally pay higher taxes but have no personal liability.

True

Financing activities for corporations include borrowing money and selling shares of their own stock.

True

Operating activities involve putting the resources of the business into action to generate a profit.

True

The balance sheet reports assets and claims to those assets at a specific point in time.

True

The information needs and questions of external users vary considerably.

True

The liability of corporate stockholders is limited to the amount of their investment.

True

The primary purpose of statement of cash flows is to provide information about the cash receipts and cash payments of a company for a specific period of time.

True

Two primary external users of accounting information are investors and creditors.

True

The economic resources that are owned by a business are called stockholders' equity.

False

The heading for the income statement might include the line "As of December 31, 20xx."

False

The majority of U.S. business is transacted by proprietorships.

False

A business is usually involved in two types of activity -financing and investing.

False

A business organized as a separate legal entity owned by stockholders is a partnership,

False

A different set of financial statements usually is prepared for each user.

False

Cash is another term for Stockholders' Equity.

False

External users of accounting information are managers who plan, organize, and run a business.

False

Investing activities involve collecting the necessary funds to support the business.

False

Management of a business firms are the only people who need accounting information.

False

Net income for the period if determined by subtracting total expenses and dividends from revenues.

False

Net income is another term for revenue.

False

Owners of business firms are the only people who need accounting information.

False

Payments to the owners are operating activities.

False

Proprietorships in the United States generate more revenue than the other two forms of business enterprise.

False

The purchase of equipment is an example of a financing activity.

False