1 The fair value principle dictates that companies record assets at their cost. This is true not only at the time the asset is purchased but also over the time the asset is held. *

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False

2 When someone invests $20,000 in a new business, this amount will be debited in Cash Account and Credited in the Personal Liability section in the company's book of accounts. *

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False

3 If a company receives an invoice of $8,560 from a vendor for the purchase of a second-hand pickup truck, due next week, it will debit one of its current assets account by $8,560 and credit Accounts Payable by $8,560. *

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False

4 Each transaction has a dual effect on the equation. If an asset is increased, there must be a corresponding decrease in another asset, or increase in a specific liability, or an increase in stockholders equity. *

True

False

5 An advance payment received by a company where the service will be performed in a future date is credited as it increases the company's liabilities. *

True

False

6 Although primary users of Financial Accounting information are the external users and for Managerial Accounting are the internal users; both branches of accounting need to be audited by CPAs. *

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False

7 Ledger or posting contributes to the recording process because it discloses the complete effect of a transaction, provides a chronological record of transactions, and helps to prevent or locate errors because the debit and credit amounts can be readily compared. *

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False

8 If a company purchases $9,500 of supplies on credit, it will debit Accounts Receivables by $9,500 and Credit Supplies by $9,500. *

True

False

9 The statement of financial position reports the assets, liabilities, and equity of a company at a specific date. This is also referred to as the balance sheet sometimes. *

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False

10 The information provided by the Retained Earnings statement indicates the reasons why retained earnings increased or decreased during the period. If there is a net loss, it is deducted with dividends in the retained earnings statement. *

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False

11 Ethical Behavior is a concern for the impact of our actions on society as a whole. It requires that an organization identify issues, analyze options, and make socially responsible decisions. *

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False

According to the expanded accounting equation, a company has recorded $109,000 of Assets, $49,500 of Liabilities, $47,500 of Owners' Equity, $24,000 of Revenue, and $4,000 of Owners' Withdrawal. The Expenses incurred by the company for this accounting period is $7,000. *

True

False