Reference no: EM131821059

True or false.

1. The main objective of the business is to ascertain that the resources of the business are properly accounted for.

2. in accrual basis of measuring earnings, income is recognised when the earning process and collection have been made.

3. bad debts expense is not recognised in cash basis accounting because there is no trade receivables recorded.

4. there is no provision for depreciation in cash basis accounting because there is no actual cash involved.

5. in the cash basis accounting , expenses are reported when actually incurred and paid.

6. the use of accrual accounting is the most acceptable assumption in the preparation of financial statements.

7. the statement of financial position can only be prepared at the end of accounting period.

8. income is generally recognised at the point of sale.

9. advertising expenses should be classified as direct matching because products sold is a direct result of advertising.

10. accrual basis always results to a greater income than cash basis.

11. depreciation expense is an example of direct matching expense principle.

12. the net income would still be the same regardless of accounting method that is used whether cash basis or accrual basis.

13. under the statement of comprehensive income method of initially recording prepayment, the expense account is debited.

14. under the statement of financial position method of initially recording pre-collection, the liability account is credited.

15. a business system of recording prepayments and advance collections is usually developed when the business is still getting started.

16. regardless how a prepayment or advance collection was originally recorded, the adjustments will bring the accounts up- to date before the financial statements are prepared.

17. when the year-end adjustment on pre-collection requires a debit to liability account, then the initial recording was under the liability method.

18. pre-collections initially recorded as income will overstate the income at the end of the accounting period if no adjustments is done for unearned portion.

19. the cost of tangible assets is allocated throughout the useful life of the assets be debiting the annual proportionate depreciation expense account.

20. amortisation is the allocation of the acquisition costs of an intangible asset over its legal or accounting estimated life.

21. depreciation expense is always equal to accumulated depreciation at the end of any accounting period.

22. salvage value is the same as scrap value for computation of depreciable amount.

23. intangible assets that are internally developed are generally taken up as an outright expense.

24. under GAAP, allowance method of estimating bad debt is permitted.

25. adjusting entries are made so that the financial statements would adhere to the generally accepted recognition principle.

26. adjusting entries are made to conform to the matching principle of accounting.

27. deferral is intended to recognise income earned but not yet received.

28. accrued expenses include expenses that were incurred but remain unpaid at the end of an accounting period.

29.accrual of expenses will increase the expense element and will correspondingly decrease the liability.

30. if unpaid expenses incurred during the accounting period are not accrued, the income for the same period will be overstated.

31.prepayments will be a mixed account if not all of the accounts are consumed at the end of the period.

32. prepayments are always taken up in books as assets at the initial recording.

33.prepayments of supplies initially recorded as asset will be adjusted at the end of the period as debit to unused supplies the portion that remains unused.

34. prepayments that are initially recorded as asset will overstate the income if all of these are totally consumed as at the end of accounting period and no adjustments are made.

35. prepayment of interest expense under asset method should be recorded as debit to unearned interest.

36. under the expense method of recording prepayments, the unexpired portion at the end of the accounting period is to be debited to the asset account.