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54This book is licensed under a Creative Commons Attribution 3.0 LicenseWhich of the following is not a correct form of the accounting equation?a. Assets = Equities.b. Assets = Liabilities + Stockholders’ equity.c. Assets – Liabilities = Stockholders’ equity.d. Assets + Stockholders’ equity = Liabilities.Which of the following is not one of the five underlying assumptions or concepts mentioned in the chapter?When the stockholders invest cash in the business, what is the effect?When services are performed on account, what is the effect?
Now turn to “Answers to self-test” at the end of your chapter to check your answers. Questions ➢Accounting has often been called the language of business. In what respects would you agree with this description? How might you argue that this description is deficient?➢Define asset, liability, and stockholders’ equity.➢How do liabilities and stockholders’ equity differ? How are they similar?➢How do accounts payable and notes payable differ? How are they similar?➢Define revenues. How are revenues measured?➢Define expenses. How are expenses measured?➢What is a balance sheet? On what aspect of a business does the balance sheet provide information?Accounting Principles: A Business Perspective 55 A Global Text1. Accounting and its use in business decisions➢What is an income statement? On what aspect of a business does this statement provide information?➢What information does the statement of retained earnings provide?➢Identify the three types of activities shown in a statement of cash flows.➢What is a transaction? What use does the accountant make of transactions? Why?➢What is the accounting equation? Why must it always balance?➢Give an example from your personal life that illustrates your use of accounting information in reaching a decision.➢You have been elected to the governing board of your church. At the first meeting you attend, mention is made of building a new church. What accounting information would the board need in deciding whether or not to go ahead?
➢A company purchased equipment for USD 2,000 cash. The vendor stated that the equipment was worth USD 2,400. At what amount should the equipment be recorded?➢What is meant by money measurement?➢Of what significance is the exchange-price (or cost) concept? How is the cost to acquire an asset determined?