Accounting Concepts And Practices

1. Accounting is the language of business

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2. A creditor would favor a positive net worth

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3. The principles of right and wrong that guide personal decisions are called business ethics

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4. Keeping personal and business records separate is an application of the business entity concept

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5. Generally Accepted Accounting Principles allow flexibility in reporting

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6. Recording business costs in terms of hours required to complete projects applies the unit of measurement concept

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7. Assets such as cash and supplies have value because they can acquire other assets or operate a business

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8. The relationship among assets, liabilities, and owner’s equity can be written as an equation

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9. The accounting equation does not have to be balanced to be correct

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10. Insurance premiums paid in advance are recorded as a liability because the insurer owes future coverage

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11. Buying items and paying for them later is called buying on account

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12. Paying cash on account increases a liability

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13. Receiving cash from a sale increases both assets and owner’s equity

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14. Realization of Revenue is applied when revenue is recorded as goods or services are sold

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15. Paying cash for expenses gives the business more equity

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16. Recording two amounts on the same side of the accounting equation causes it to become unbalanced

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17. Receiving cash from a customer for a prior sale increases both cash and accounts receivable

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18. A withdrawal decreases owner’s equity

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