Chapter 1 Review Questions True-False Statements

Flashcard maker : Lily Taylor
A business organized as a separate legal entity owned by stockholders is a partnership,
False
Corporate stockholder generally pay higher taxes but have no personal liability.
True
The liability of corporate stockholders is limited to the amount of their investment.
True
The majority of U.S. business is transacted by proprietorships.
False
Proprietorships in the United States generate more revenue than the other two forms of business enterprise.
False
Owners of business firms are the only people who need accounting information.
False
Management of a business firms are the only people who need accounting information.
False
External users of accounting information are managers who plan, organize, and run a business.
False
The information needs and questions of external users vary considerably.
True
Accounting communicates financial information about a business to both internal and external users.
True
Two primary external users of accounting information are investors and creditors.
True
Financing activities for corporations include borrowing money and selling shares of their own stock.
True
Investing activities involve collecting the necessary funds to support the business.
False
The purchase of equipment is an example of a financing activity.
False
Assets are resources owned by a business and provide future services or benefits to the business.
True
Payments to the owners are operating activities.
False
The economic resources that are owned by a business are called stockholders’ equity.
False
Operating activities involve putting the resources of the business into action to generate a profit.
True
A business is usually involved in two types of activity -financing and investing.
False
Net income for the period if determined by subtracting total expenses and dividends from revenues.
False
A different set of financial statements usually is prepared for each user.
False
The heading for the income statement might include the line “As of December 31, 20xx.”
False
Net income is another term for revenue.
False
Cash is another term for Stockholders’ Equity.
False
The primary purpose of statement of cash flows is to provide information about the cash receipts and cash payments of a company for a specific period of time.
True
The balance sheet reports assets and claims to those assets at a specific point in time.
True

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