Which of the Following Statements Is Not True

question 26

Multiple Choice

Which of the following statements is not true?

• A) When net income is positive, revenue is greater than expenses.
• B) When net income is negative, retained earnings decreases, all other things equal.
• C) When net income is positive, stockholders' equity increases, all other things equal.
• D) When net income is negative there can be no dividends declared.

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Definitions:

Ending Inventory

Merchandise value ready for sale at the close of an accounting cycle.

Consistency Principle

An accounting standard that mandates entities to apply the same accounting methods and practices from period to period.

Expense Recognition Principle

This principle dictates that expenses should be recognized in the accounting period when they are incurred, not necessarily when they are paid, matching expenses to the revenues they help generate.

Physical Flow Assumption

An accounting method that tracks the physical movement of goods in inventory, often used to calculate cost of goods sold or ending inventory.