AC 160Chapter_2. Chapter 2—Analyzing Transactions: The Accounting Equation

1. A business entity is an individual, association, or organization with control over economic resources and which engages in economic activities. ANS: T DIF: Easy OBJ: LO 2-1MSC: AACSB Communication 2. Liabilities represent an "inside" interest in a business. ANS: F DIF: Easy OBJ: LO 2-1MSC: AACSB Communication 3. The accounting equation shows the relationship among the three basic accounting elements--assets, revenues, and owner's equity. ANS: F DIF: Easy OBJ: LO 2-2MSC: AACSB Communication 4. If owner's equity and liabilities increased during the period, then assets must also have increased. ANS: T DIF: Easy OBJ: LO 2-2MSC: AACSB Communication 5. An accounts payable is an unwritten promise to pay a supplier for assets purchased or services rendered. ANS: T DIF: Easy OBJ: LO 2-1MSC: AACSB Communication