Esercitazione esame Environmental accounting True or False con soluzioni

Financial accounting: operating decisions and the accounting system

True or false questions

1) The operating cycle is the time that elapses between a company's cash payment to suppliers for inventory purchases and the collection of cash from sale of inventory to customers.

2) A retail store would likely have a shorter operating cycle than an automobile manufacturer.

3) The time period assumption implies that the life of a business entity can be reported in time periods such as quarters and years.

4) An example of operating revenue would be the revenue created by the sale of an automobile by a car dealership.

5) According to the revenue recognition principle, revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

6) Interest expense is reported on the income statement as an operating expense.

7) Earnings per share must be either reported on the income statement or disclosed in the notes to the financial statements.

8) Interest revenue is reported as operating revenue and therefore increases operating income.

9) Expenses are the result of decreases in assets or increases in liabilities incurred in order to generate revenues.

10) According to the expense recognition principle, wages expense is recognized on the income statement when the wages are paid rather than when the employee provides the work.

11) A gain resulting from the sale of buildings and equipment is not reported as operating income on the income statement.

12) Under accrual accounting, rent expense for February 2019 would be recognized on the income statement in February 2019 even though it had been paid for in January of 2019.

13) Under accrual basis accounting, revenues are recognized when goods or services are transferred to customers, and expenses are recognized when incurred to generate that revenue.

14) Application of generally accepted accounting principles requires that the accrual basis of accounting be used for reporting revenues and expenses on the income statement.

15) The expense recognition principle requires expenses to be recorded on the income statement.

16) The revenue recognition principle recognizes revenue when the goods or services are transferred to customers, regardless of the timing of the cash collection from customers.

17) Selling inventory to a customer on account results in an increase in an asset and an increase in revenues.

18) Cash received prior to the providing of the goods or services results in an increase in both assets and liabilities.

19) Using cash to purchase office supplies, which will be consumed later, results in an increase in expenses and a decrease in assets at the time of purchase.

20) Revenue accounts have credit balances because they increase stockholde