The Accounting Information System- Test Bank

The Accounting Information System- Test Bank Chapter 2--The Accounting Information System Student: 1. The time-period assumption assumes that a company prepares its financial statements every month. True False 2. Because it tends to provide the most reliable measure of activity, all assets are reported on the balance sheet at their fair market values. True False 3. The term used to refer to an asset's original cost is book value. True False 4. The going concern assumption infers that a company will continue to operate into the near future. True False 5. A company in the process of liquidation is considered to be under the going concern assumption. True False 6. The International Accounting Standards Board (IASB) was created in order to develop worldwide accounting standards that are required for all financial statements, regardless of the country where the financial statements were prepared. True False 7. The initial step in the recording process is sometimes referred to as journalizing. True False 8. The issuance of common stock increases a company's assets and stockholders’ equity. True False 9. The payment of a dividend increases both cash and stockholders' equity of the distributing entity. True False 10. According to the historical cost principle, assets are always carried at their current market value. True False 11. An accounting transaction may impact only one financial statement or multiple statements. True False 12. The accounting equation must balance before and after every accounting transaction. True False 13. A chart of accounts is prepared to determine whether the books have gotten out of balance. True False 14. GAAP has established a universal chart of accounts that is applicable to all businesses in the United States. True False