True or False (correct √ wrong X)

11. According to the accrual system to determine income and expenses, operating profit and operating cash flow are often inconsistent. ()

12. According to the principle of prudence, provision for impairment of accounts receivable and accounts payable must be made. ()

13. When the net cash flow generated by operating activities is significantly less than the net profit, the profit quality is poor. ()

14. In the balance sheet, owners’ equity cannot be negative. ()

15. Profits will lead to an increase in net assets, and losses will lead to a decrease in net assets. ()

16. When the cash flow from investment activities is a net outflow, it means that the investment activities are at a loss. ()

17. When insolvency, the accounting equation is not constant. ()

18. The lower the asset-liability ratio, the better. ()

19. Repayment of debt will lead to simultaneous reductions on both sides of the accounting equation. ()

20. The receipt of shareholder investment will cause both sides of the accounting equation to increase simultaneously. ()

Answer rating: 100% (QA)

11 True Under the accrual system we recognize transactions as and once they occur creating legal rights and obligations without expecting actual exchange of cash Hence we recognize credit salespurchas... View the full answer