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1、1. A business entity is regarded as separate from the personal activities of its owners whether it is a sole proprietorship, a partnership, or a corporation.True False2. Assets need not always have physical characteristics such as buildings, machinery or inventory.True False3. The going concern prin
2、ciple assumes that the business will continue indefinitely. True False4. Notes payable and accounts payable are written promises to pay an amount owed by a certain date. Notes payable generally have interest but accounts payable generally do not.True False5. A net profit results from having more rev
3、enues than liabilities. True False6. The sale of additional shares of capital stock will cause treasury stock to increase. True False7. Articulation between the financial statements means that they relate closely to each other.True False8. Limited liability means that owners of a business are only l
4、iable for the debts of the business up to the amounts they can afford.True False9. In a business organized as a corporation, it is not necessary to list the equity of each stockholder on the balance sheet.True False10. Total assets always equal total liabilities plus total owners' equity. True F
5、alse11. A cash flow statement reports revenue and expense activities for a specific time period such as one month or one year.True False12. Any business event that might affect the future profitability of a business should be reported in its balance sheet.True False13. Total assets plus total liabil
6、ities equals total owners' equity. True False14. The practice of showing assets on the balance sheet at their cost rather than at their current market value is explained in part by the fact that cost is supported by objective evidence that can be verified by independent experts.True False15. The
7、 realization principle states that the activities of an entity should be kept separate from those of its owner.True False16. The entity principle states that the affairs of the owners are not part of the financial operations of a business entity and should be separated. True False17. The accounting
8、equation may be stated as "assets minus liabilities equals owners' equity."True False18. A transaction that causes an increase in an asset may also cause a decrease in another asset, an increase in a liability, or an increase in owners' equity. True False19. The collection of an ac
9、count receivable will cause total assets to decrease. True False20. The payment of a liability causes an increase in owners' equity. True False21. When a business borrows money from a bank, the immediate effect is an increase in total assets and a decrease in liabilities or owners' equity.Tr
10、ue False22. The purchase of an asset such as office equipment, for cash will cause owners' equity to decrease.True False23. The owner of a sole proprietorship is personally liable for the debts of the business, whereas the stockholders of a corporation are not personally liable for the debts of
11、the business.True False24. If a company purchases equipment for cash, its total assets will increase. True False25. If a company purchases equipment by issuing a note payable, its total assets will not change.True False26. It is not unusual for an entity to report a significant increase in cash from
12、 operating activities, but a decrease in the total amount of cash. True False27. The cash flow statement provides a link between two balance sheets by showing how net income (or loss) has changed owners' equity from one balance sheet date to the next.True False28. According to Sarbanes-Oxley, in
13、ternal controls must be audited by the same accounting firm that audits the financial statements.True False29. The Public Company Accounting Oversight Board was created by the American Institute of CPAs to oversee the public accounting profession.True False30. The major outgrowth from business failu
14、res and allegations of fraudulent financial reporting during the 1990's was the passage of the Securities and Exchange Act. True FalseChapter 02 Basic Financial StatementsA nswer KeyTrue / False Questions1. A business entity is regarded as separate from the personal activities of its owners whet
15、her it is a sole proprietorship, a partnership, or a corporation.TRUEAACSB: Reflective ThinkingAICPA BB: LegalAICPA FN: ReportingLearning Objective: 2Learning Objective: 82. Assets need not always have physical characteristics such as buildings, machinery or inventory.TRUEAACSB: Reflective ThinkingA
16、ICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Objective: 23. The going concern principle assumes that the business will continue indefinitely. TRUEAACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 1 Learning Objective: 24. Notes payable and ac
17、counts payable are written promises to pay an amount owed by a certain date. Notes payable generally have interest but accounts payable generally do not.TRUEAACSB: Reflective ThinkingAICPA BB: Resource ManagementAICPA FN: MeasurementLearning Objective: 45. A net profit results from having more reven
18、ues than liabilities. FALSEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Objective: 3Learning Objective: 56. The sale of additional shares of capital stock will cause treasury stock to increase. FALSE7. Articulation between the financial statements means that the
19、y relate closely to each other.TRUEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Objective: 78. Limited liability means that owners of a business are only liable for the debts of the business up to the amounts they can afford.FALSEAACSB: Reflective ThinkingAICPA
20、BB: LegalAICPA FN: MeasurementLearning Objective: 89. In a business organized as a corporation, it is not necessary to list the equity of each stockholder on the balance sheet.TRUE10. Total assets always equal total liabilities plus total owners' equity. TRUEAACSB: Reflective ThinkingAICPA BB: C
21、ritical ThinkingAICPA FN: MeasurementLearning Objective: 311. A cash flow statement reports revenue and expense activities for a specific time period such as one month or one year.FALSEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: ReportingLearning Objective: 612. Any business event
22、 that might affect the future profitability of a business should be reported in its balance sheet.FALSE13. Total assets plus total liabilities equals total owners' equity. FALSEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Objective: 314. The practice of show
23、ing assets on the balance sheet at their cost rather than at their current market value is explained in part by the fact that cost is supported by objective evidence that can be verified by independent experts.TRUEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Obj
24、ective: 215. The realization principle states that the activities of an entity should be kept separate from those of its owner.FALSE16. The entity principle states that the affairs of the owners are not part of the financial operations of a business entity and should be separated. TRUEAACSB: Reflect
25、ive ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Objective: 217. The accounting equation may be stated as "assets minus liabilities equals owners' equity."TRUEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Objective: 318. A transa
26、ction that causes an increase in an asset may also cause a decrease in another asset, an increase in a liability, or an increase in owners' equity.TRUE19. The collection of an account receivable will cause total assets to decrease. FALSEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA
27、FN: MeasurementLearning Objective: 320. The payment of a liability causes an increase in owners' equity. FALSEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Objective: 321. When a business borrows money from a bank, the immediate effect is an increase in total
28、 assets and a decrease in liabilities or owners' equity.FALSE22. The purchase of an asset such as office equipment, for cash will cause owners' equity to decrease.FALSEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Objective: 323. The owner of a sole propr
29、ietorship is personally liable for the debts of the business, whereas the stockholders of a corporation are not personally liable for the debts of the business.TRUEAACSB: Reflective ThinkingAICPA BB: LegalAICPA FN: MeasurementLearning Objective: 824. If a company purchases equipment for cash, its to
30、tal assets will increase. FALSEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementLearning Objective: 325. If a company purchases equipment by issuing a note payable, its total assets will not change.FALSEAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Measureme
31、ntLearning Objective: 326. It is not unusual for an entity to report a significant increase in cash from operating activities, but a decrease in the total amount of cash.TRUE27. The cash flow statement provides a link between two balance sheets by showing how net income (or loss) has changed owners&
32、#39; equity from one balance sheet date to the next.FALSEAACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: MeasurementLearning Objective: 628. According to Sarbanes-Oxley, internal controls must be audited by the same accounting firm that audits the financial statements.TRUEAACSB: Eth
33、icsAICPA BB: LegalAICPA FN: ReportingLearning Objective: 929. The Public Company Accounting Oversight Board was created by the American Institute of CPAs to oversee the public accounting profession.FALSEAACSB: EthicsAICPA BB: LegalAICPA FN: ReportingLearning Objective: 930. The major outgrowth from business failures and allegations of fraudulent financial reporting during the 1990's was the passage of the Securities and Exchange Act.FALSEAACSB: EthicsAICPA BB: LegalAICPA FN: ReportingLearning Objective: 9