AF-Activity 01-LM01CP01

1.     Accounting is often characterized as “language of business”.

• True

• False

The basic purpose of accounting is to provide primarily qualitative information that the users of an economic entity need.

• True

• False

A retailer of goods is most likely involved in trading or merchandising business.

• True

• False

Luca Pacioli was the inventor of double-entry bookkeeping.

• True

• False

An advantage of a merchandising business over a service business is that the owner need not have an expertise or special skills.

• True

• False

According to accrual basis of accounting, a business should record a sale only when the sale price is collected.

• True

• False

Merchandising entities buy raw materials, convert them into products and then sell the products to other companies or to final consumers.

• True

• False

Since the life of the business is assumed to be indefinite, the financial statement of the business should be prepared only when it goes into liquidation.

• True

• False

A sole proprietor has limited risk with respect to the amount of resources invested in the business

• True

• False

An advantage of a partnership over a sole proprietorship is the ability to raise greater capital.

• True

• False