Which of the following statements is untrue?
- Recognition requires that revenues be recorded when earned
which is not necessarily when cash is received.
- An annual income statement summarizes revenues earned; less
expenses incurred over the year.
- An annual balance sheet shows changes in a business's assets,
liabilities, and equity during the year.
- Matching requires that financial transactions be reported in
the period in which they occurred.
- The Business Entity Principle requires that each economic
entity maintain separate records.
Q2. Which of the following statements is untrue?
- Financial accounting focuses on meeting the needs of external
users, the investors, and creditors.
- An organization is a group of individuals who come together to
pursue a common set of goals and objectives.
- There are three common forms of business organization,
proprietorship, partnership, and corporation.
- Corporations listed on stock exchanges are required to prepare
annual financial statements but are not generally required to
prepare interim financial statements every three months.
- The first three financial reports are statements of income,
changes in equity, and financial position.
Q3. Which of the following statements is true?
- XYZ Corp. makes a sale and the customer promises to pay in the
future, so the customer has an Account Receivable.
- When XYZ Corp. pays 12 month’s rent to the Acme Realty in
advance, then Acme should record Rent Revenue.
- When the total Debits equal the total Credits on a Trial
Balance it proves that no mistakes have been made in journalizing
the transactions and posting them to the ledger.
- When a transaction increases an asset or expense, then those
asset and expense accounts are debited. All other accounts are
credited when they increase.
- An account records increases and decreases in
a specific asset, liability, or equity.
Q4. A company's balance sheet shows:
cash $22,000, accounts receivable $16,000, office equipment $5,000,
and accounts payable $17,000. What is the amount of owner's equity?
Show plausible calculations to get credit.
Answer: Owner’s equity is $