1. A direct expense should not be allocated among more than one department. T
2. Cost allocation is the process of identifying, aggregating, and assigning indirect costs to cost objects. T
3. All businesses are operated to generate a profit F
4. A business generally has just one expense account. F
5. Accounts Payable represent amounts a business must pay T
6. The accounting equation is expressed as Assets + Liabilities = Owner’s Equity F
7. Components of the income statement are revenues, expenses, and net income or loss T

​

8. Service companies must carry a large amount of inventory to meet consumer demand. F
9. Retailers sell their products to consumers T
10. Notes payable are the primary medium of exchange for business transactions. F

11. A promissory note, unlike a check, cannot be endorsed and transferred to a bank in return for cash. F

12. The days, months, or years from the date of issue until a note is to be paid are the time of a note. T

13. The percentage of the principal that is paid for use of the money is the interest rate of a note. T
14.  The amount that is due on the maturity date of a note is the maturity value. T

​

​

15. The principal of a note is sometimes referred to as the face amount of a note. T
16. Liabilities due within a short period of time are current liabilities. T
17. When a business issues a note payable, the principal of the note is credited to a liability account. T
18. The interest accrued on a note payable is credited to an expense account. F
19. Issuing a note payable for an extension of time if unable to pay an account when due eliminates the liability of the business issuing the note. F
20. When a business issues a note payable for an extension of time on its account payable, the vendor account is debited. T
21. The date a note is written is not counted in calculating the maturity date. T
22. Notes receivable paid within one year generally are classified as non-current assets. F
23. A note is recorded as a note receivable by the person or business to whom the amount of a note is payable. T

​

​

​

23. Using a receipt as the source document for recording cash received for a note receivable is an application of the Objective Evidence concept T
24. The interest earned on money loaned is interest income. T
25. When a business receives payment for a note receivable, Notes Receivable is credited. T
26. A note that is not paid when due is a dishonored note. T
27. Notes Receivable is an asset account and has a normal credit balance. F
28. Notes Payable is a liability account and has a normal credit balance. T

​

​