Chapter 2—Analyzing Transactions: The Accounting Equation TRUE/FALSE 1. A business entity is an individual, association, or organization with control over economic resources and which engages in economic activities. ANS: T PTS: 1 DIF: Difficulty: Easy OBJ: LO: 2-1 NAT: BUSPROG: Communication STA: AICPA BB-Industry TOP: ACBSP: APC-03-Business Forms KEY: Bloom's: Knowledge NOT: 1 min. 2. Liabilities represent an "inside" interest in a business. ANS: F PTS: 1 DIF: Difficulty: Easy OBJ: LO: 2-1 NAT: BUSPROG: Communication STA: AICPA BB-Industry TOP: ACBSP: APC-03-Business Forms KEY: Bloom's: Knowledge NOT: 1 min. 3. The accounting equation shows the relationship among the three basic accounting elements⎯assets, revenues, and owner's equity. ANS: F PTS: 1 DIF: Difficulty: Easy OBJ: LO: 2-2 NAT: BUSPROG: Communication STA: AICPA BB-Industry TOP: ACBSP: APC-02-GAAP KEY: Bloom's: Knowledge NOT: 1 min. 4. If owner's equity and liabilities increased during the period, then assets must also have increased. ANS: T PTS: 1 DIF: Difficulty: Easy OBJ: LO: 2-2 NAT: BUSPROG: Communication STA: AICPA BB-Industry TOP: ACBSP: APC-02-GAAP KEY: Bloom's: Knowledge NOT: 1 min. 5. An accounts payable is an unwritten promise to pay a supplier for assets purchased or services rendered. ANS: T PTS: 1 DIF: Difficulty: Easy OBJ: LO: 2-1 NAT: BUSPROG: Communication STA: AICPA BB-Industry TOP: ACBSP: APC-02-GAAP KEY: Bloom's: Knowledge NOT: 1 min. 6. If the revenue of a period exceeds the expenses, the excess repr