The basic accounting equation is in balance when the creditor and ownership claims

against the business equal the assets.

> True

External transactions involve economic events between the company and some other

enterprise or party.

> True

The purchase of office equipment on credit increases total assets and total liabilities.

> True

The basic accounting equation states that Assets = Liabilities.

> False

The monetary unit assumption states that transactions that can be measured in terms of

money should be recorded in the accounting records.

> true

Accounting communicates financial information about a business enterprise to both

internal and external users.

> True

The cost and fair market value of an asset are the same at the time of acquisition and in

all subsequent periods.

> False

The study of accounting is not useful for a business career unless your career objective is

to become an accountant.

> False

Accountants rely on a fundamental business concept—ethical behavior—in reporting

financial information.

> True

At the time an asset is acquired, cost and value should be the same.

> True
A working knowledge of accounting is not relevant to a lawyer or an architect.

> False

Private accountants are accountants who are not employees of business enterprises.

> False

Net income for the period is determined by subtracting total expenses and drawings from

total revenues.

> False

Bookkeeping and accounting are one and the same because the bookkeeping function

includes the accounting process.

> False

In order to possess future service potential, an asset must have physical substance.

> False

Government accounting deals solely with the identification of the sources of resources consistent with laws.

> False

A corporation is an economic unit that is legally separate from its owners.

> True

A business transaction is the occurrence of an event or of a condition that must be recorded.

> False

For accounting purposes, a business and its owner are considered one and the same.

> False

All members of the accountancy profession are Certified Public Accountants.

> False

Classification reduces the effects of numerous transactions into useful groups or categories.

> True

An audit is the independent examination that ensures the fairness and reliability of the reports that management
submits to users outside the business entity.

> True

The terms bookkeeping and accounting are synonymous

> False

For reporting purposes, the personal assets and debts of a business owner should be combined with the assets
and debts of the business.

> False

A partnership is always owned by two individuals.

> False

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

> True

Most members of the accountancy profession are Certified Public Accountants.

> True

The entity concept states that the transactions of different entities should not be accounted for together.

> True

Summarization reduces the effects of numerous transactions into useful groups or categories.

> False

The personal liability of a partner is limited to the amount of his investment.

> False