Prax Quiz 1 answers

Prax Quiz 1 answers - UNIVERSITY OF CALIFORNIA SAN DIEGO...

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UNIVERSITY OF CALIFORNIA SAN DIEGO Econ 4 Summer 2008 Practice Quiz 1 ANSWERS 1. The basic accounting equation is: A = L + Eq Yes: Assets must equal Liabilities + Equity at any point in time. 2. The correct response to #1 above reflects the: (B) Duality concept – for every increase (decrease) in Assets, there must be a similar increase (decrease) in either Liabilities or Equity. 3. Accrual accounting profits are a good measure of cash flow. No . Accrual profits and Cash Flow can be very different. 4. The RHS of the Balance sheet lists the company’s sources of financial capital. Yes . The RHS is Liabilities & Equity, which are the funding “sources” of the LHS “Assets”. 5. Equity holders are also called Creditors. No . Creditors lend finds (make loans). Equity Holders, those persons who have purchased “equity” claims such as common stock, are the Company’s Owners. 6. The basic purpose of an audit is to prevent financial fraud. No
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Prax Quiz 1 answers - UNIVERSITY OF CALIFORNIA SAN DIEGO...

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