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Chapter 2 The Accounting Information System and Financial Statements
TRUEFALSE
- The time period assumption assumes that a company prepares its financial statements every
month.(A) True (B) False
Answer : (B)
- Because it tends to provide the most reliable measure of activity, all assets are reported on the
balance sheet at their fair market values.(A) True (B) False
Answer : (B)
- As long as a company keeps a record of supporting calculations, recorded amounts are verifiable.
(A) True (B) False
Answer : (B)
- The going-concern assumption infers that a company will continue to operate into the near future.
(A) True (B) False
Answer : (A)
- A company expected to go bankrupt in the near future is considered to be operating under the
going-concern assumption.(A) True (B) False
Answer : (B)
Cornerstones of Financial Accounting Canadian 2nd Edition Rich Test Bank Visit TestBankDeal.com to get complete for all chapters
- For each transaction, the number of accounts debited must equal the number of accounts
credited.(A) True (B) False
Answer : (B)
- The initial step in the accounting cycle is to journalize transactions.
(A) True (B) False
Answer : (B)
- When a company issues (i.e., sells) common shares to investors in exchange for cash, the effect of
this transaction is an increase in assets and an increase in shareholders' equity.(A) True (B) False
Answer : (A)
- Because dividends are a distribution of a company's net income, they are recorded as an
adjustment to net income.(A) True (B) False
Answer : (B)
- According to the historical cost principle, assets are measured at the exchange price at the time
the activity occurs.(A) True (B) False
Answer : (A)
- An accounting transaction may impact only a single financial statement or multiple financial
statements.(A) True
(B) False
Answer : (A)
- The accounting equation must be in balance before and after every accounting transaction.
(A) True (B) False
Answer : (A)
- A chart of accounts is prepared to determine whether the accounting records have gotten out of
balance.(A) True (B) False
Answer : (B)
- A company's chart of accounts can be changed over time as the nature of the business activities
change.(A) True (B) False
Answer : (A)
- A T-account for Cash cannot contain any credits.
(A) True (B) False
Answer : (B)
- A debit entry increases assets and revenue accounts.
(A) True (B) False
Answer : (B)
- The Dividends Declared account has a normal debit balance.
(A) True (B) False
Answer : (A)
- Under the double-entry system of accounting, every transaction affects at least two accounts.
(A) True (B) False
Answer : (A)
- Under the double-entry system of accounting, a debit represents a decrease to a liability
account.(A) True (B) False
Answer : (A)
- Income statement accounts affect Retained Earnings.
(A) True (B) False
Answer : (A)
- When an event impacts a financial statement element, it should be recognized in the accounting
records even if reliability of the amount is questionable.(A) True (B) False
Answer : (B)
- The process of transferring information from the general ledger to the general journal is called
posting.(A) True (B) False
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