Mastering Financial Statements

True or false: Accounting consists of three basic activities - identification, recording, and communication.

True or false: Bookkeeping encompasses all steps in the accounting process.

True or false: Accountants prepare, but do not interpret, financial reports.

True or false: The two most common types of external users are investors and company officers.

True or false: Total assets must equal total liabilities and owner's equity.

True or false: The statement of cash flows provides information on the cash receipts and payments for a specific period of time.

True or false: The balance sheet is prepared as of a specific date.

True or false: The net income reported for December 2017 can be determined from the given information.

True or false: The Sarbanes-Oxley Act was passed to reduce unethical behavior in corporate accounting and prevent future scandals?

True or false: The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board (FASB)?

True or false: The historical cost principle requires companies to record assets at their fair value?

True or false: According to the economic entity assumption, a business owner's personal expenses must be separated from the expenses of the business?

True or false: The owner invested $25,000 cash in the business.

True or false: The company purchased $7,000 of office equipment on credit.

True or false: The company received $8,000 cash in exchange for services performed.

True or false: The company paid $850 for this month’s rent.

True or false: If a business is liquidated, claims of creditors must be paid before ownership claims.

True or false: The basic accounting equation is Assets = Liabilities + Owner's Equity.

True or false: Expenses are the cost of assets consumed or services used in the process of earning revenue.

True or false: The transaction of Softbyte Inc. receiving $1,200 cash from customers for app development services will result in an increase in assets and owner's equity.

True or false: Softbyte Inc. pays $250 in cash to the Daily News for advertising on its online website.

True or false: Softbyte Inc. receives $1,500 in cash from customers for services performed and bills the remaining balance of $2,000 on account.

True or false: Softbyte Inc. pays $600 in cash for office rent, $900 for salaries and wages of employees, and $200 for utilities.

True or false: Softbyte Inc. pays $250 in cash to the Daily News, reducing the accounts payable recorded in Transaction 5.

IFRS tends to be more principles-based and GAAP tends to be more rules-based.

The internal control standards applicable to Sarbanes-Oxley (SOX) apply to all companies, regardless of size or listing status.

There is ongoing debate about whether non-U.S. companies should have to comply with the additional regulations imposed by Sarbanes-Oxley (SOX).

Both the IASB and the FASB are working towards eliminating major differences in the way certain transactions are accounted for and reported.

A single set of high-quality international accounting standards would not have any benefits for mergers and acquisition activity.

A single set of high-quality international accounting standards would not benefit financial markets.