This preview has intentionally blurred parts. Sign up to view the full document

View Full Document

Unformatted Document Excerpt

Chapter 002 The Accounting Information System True / False Questions 1. External transactions are transactions the firm conducts with a separate economic entity, such as selling products to a customer, purchasing supplies from a vendor, paying salaries to an employee, and borrowing money from a bank. True False 2. Internal transactions are events that affect the financial position of the company but do not include an exchange with a separate economic entity. Examples are using supplies on hand and earning revenues after having received cash in advance from a customer. True False 3. A list of all account names used to record transactions of a company is referred to as a T- account. True False 4. After recording each transaction, total assets must equal total liabilities plus stockholders' equity. True False 5. If a transaction causes total assets of the company to increase by $2,000, then liabilities plus stockholders' equity also increases by $2,000. True False 6. If a transaction causes total assets of the company to increase by $5,000 and total liabilities to increase by $3,000, then stockholders' equity increases by $8,000. True False 7. Borrowing cash from the bank causes assets to increase and liabilities to increase. True False 2-1 Chapter 002 The Accounting Information System 8. Purchasing equipment using cash causes assets to increase. True False 9. Providing services to customers for cash causes stockholders' equity to increase. True False 10. Incurring employees' salaries but not paying them causes no change to stockholders' equity. True False 11. Paying dividends to its stockholders causes a company's stockholders' equity to decrease. True False 12. Selling common stock for cash causes assets to increase and stockholders' equity to decrease. True False 13. Purchasing office supplies on account causes assets to increase and liabilities to increase. True False 14. Providing services to customers on account causes assets to increase and stockholders' equity to increase. True False 15. Receiving cash in advance from a customer for services to be provided in the future causes assets to increase and stockholders' equity to increase. True False 2-2 Chapter 002 The Accounting Information System 16. Paying for one year of rent in advance does not affect the accounting equation. True False 17. Purchasing supplies on account increases the balance of the accounts receivable account. True False 18. Amounts owed from customers are recorded in the accounts receivable account. True False 19. The two components of stockholders' equity are debits and credits. True False 20. Revenues have the effect of increasing retained earnings. ... View Full Document

End of Preview

Sign up now to access the rest of the document