Question

Q2. Which of the following statements is untrue?

1. Financial accounting focuses on meeting the needs of external users, the investors, and creditors.
2. An organization is a group of individuals who come together to pursue a common set of goals and objectives.
3. There are three common forms of business organization, proprietorship, partnership, and corporation.
4. Corporations listed on stock exchanges are required to prepare annual financial statements but are not generally required to prepare interim financial statements every three months.
5. The first three financial reports are statements of income, changes in equity, and financial position.

Q3. Which of the following statements is true?

1. XYZ Corp. makes a sale and the customer promises to pay in the future, so the customer has an Account Receivable.
2. When XYZ Corp. pays 12 month’s rent to the Acme Realty in advance, then Acme should record Rent Revenue.
3. When the total Debits equal the total Credits on a Trial Balance it proves that no mistakes have been made in journalizing the transactions and posting them to the ledger.
4. When a transaction increases an asset or expense, then those asset and expense accounts are debited. All other accounts are credited when they increase.
5. An account records increases and decreases in a specific asset, liability, or equity.

Answer 1

A2. following statements are untrue.

1. Corporations listed on stock exchanges are required to prepare annual financial statements but are not generally required to prepare interim financial statements every three months. this statement is untrue, every listed company mandatorily required to prepare Interim financial statement as requiered by law ( they are big financial organisations need to follow more compliance to make sure transparency between stakeholders and organisation.)
2. The first three financial reports are statements of income, changes in equity, and financial position. Untrue first 3 Financial reports are statements of income, financial position , cash flow statement.

however following are TRUE

1. Financial accounting focuses on meeting the needs of external users, the investors, and creditors.
2. An organization is a group of individuals who come together to pursue a common set of goals and objectives.
3. There are three common forms of business organization, proprietorship, partnership, and corporation.

A3. following statements are true

1. XYZ Corp. makes a sale and the customer promises to pay in the future, so the customer has an Account Receivable. TRUE in mercantile basis of accounting income is recognised on accured basis , so on sales which have been promised to pay in near future is account receivable.
2. When XYZ Corp. pays 12 month’s rent to the Acme Realty in advance, then Acme should record Rent Revenue. TRUE accounting entry will be Rent Receivable account debit to amount and Credited to Rent Account as in mercantile basis of accounting entry will be recorded if income accured basis when it is actually accured.
3. When the total Debits equal the total Credits on a Trial Balance it proves that no mistakes have been made in journalizing the transactions and posting them to the ledger. TRUE this is basic as well as thumb rule of trail balance that is all debit total = all credit total.
4. When a transaction increases an asset or expense, then those asset and expense accounts are debited. All other accounts are credited when they increase. TRUE other accounts are incomes, liability and equity all them will be credited if they increases.
5. An account records increases and decreases in a specific asset, liability, or equity and also expenses and incomes thatswhy the given statement is incorrect UNTRUE