Financial Accounting Basics II

8 Questions | By Liannemateo | Updated: Mar 21, 2022 | Attempts: 134

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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