Financial Accounting

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Unformatted text preview: ch2 Student: ___________________________________________________________________________ 1. The primary objective of financial reporting is to provide relevant information to external decision makers. True False 2. In order for information to be reliable the information needs to be provided on a timely basis. True False 3. In order for information to be relevant the information should have both predictive and feedback value. True False 4. The continuity assumption assumes that a business will continue to operate into the foreseeable future. True False 5. The current assets section of a balance sheet includes both inventory and accounts receivable. True False 6. The stockholders' equity section of a balance sheet includes contributed capital and retained earnings. True False 7. Assets are reported on the balance sheet in the order of their liquidity. True False 8. Many valuable assets such as trademarks and copyrights are not reported within a company's balance sheet. True False 9. Stockholders' equity includes the financing provided by owners. True False 10. Financial reporting focuses on reporting the impact of transactions on an entity's financial position. True False 11. Unearned revenue is reported on the balance sheet as a liability and represents amounts paid to an entity for which the entity has an obligation to provide future services and/or goods. True False 12. A business transaction consists of an exchange of assets or services for assets, services, or promises to pay between a business and an external party to the business. True False 13. The dual effects concept implies that every transaction has at least two effects on the accounting equation. True False 14. The accounting equation doesn't have to be in balance after the recording of each transaction. True False 15. A company's assets and stockholders' equity both increase when the company sells additional shares of stock in exchange for cash. True False 16. Purchasing stock of another company for cash doesn't result in an increase in total assets for the purchasing company. True False 17. The normal balance for an asset account is a debit and the normal balance for a liability account is a credit. True False 18. The recording of a journal entry precedes the posting to the general ledger. True False 19. Asset accounts have a debit balance and are increased by debiting the account. True False 20. Liability and stockholders' equity accounts have credit balances and are decreased by debiting the account. True False 21. A journal entry is an expression of the effects of a transaction on accounts which has equal debits and credits. True False 22. The T-account is useful for summarizing account balances and is found in the general ledger. True False 23. The T-account is very useful for accumulating the effects of transactions on account balances and for determining individual account balances....
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This document was uploaded on 01/29/2012.

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