Financial Accounting Basics II

8 Questions

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Financial Accounting Quizzes & Trivia

Questions and Answers
  • 1. 
    The payment of a liability in cash will decrease stockholders' equity.
    • A. 

      True

    • B. 

      False

  • 2. 
    When a company borrows money from the bank, it leads to a cash inflow from a financing activity.
    • A. 

      True

    • B. 

      False

  • 3. 
    When a loan is repaid to the bank, it leads to an inflow of cash from a financing activity.
    • A. 

      True

    • B. 

      False

  • 4. 
    When a business pays for a two year insurance policy, it has incurred an expense.
    • A. 

      True

    • B. 

      False

  • 5. 
    The assumption that the assets and liabilities of the busness are accounted for on the books of the company but not included in the records of the owner is the
    • A. 

      Unit-of measure assumption

    • B. 

      Continuity assumption

    • C. 

      Historical cost principle

    • D. 

      Separate entity assumption

  • 6. 
    A company purchases $20K of inventory in February 2011 and will pay for it in March 2011. Which of the following statements is false?
    • A. 

      The company will report an accounts payable of $20K in February

    • B. 

      The statement of cash flows will report an operating cash outflow of $20K in March

    • C. 

      The income statement will report the $20K as cost of goods sold in February when it was purchased

    • D. 

      The company will record $20K in inventory purchased on February 2011

  • 7. 
    The operating cycle is the time it takes for a company to purchase goods, pay for the goods, sell them to customers, and collect the cash from customers.
    • A. 

      True

    • B. 

      False

  • 8. 
    It is not possible for the left side of the accounting equation to both increase and decrease as a result of the same transaction
    • A. 

      True

    • B. 

      False