Final answer:
The statement about current assets is false; current assets include cash, inventory, and accounts receivable, which are expected to be used or converted into cash within a year and are not typically the primary assets generating most of a firm's income. Assets that produce the majority of income tend to be long-term and include non-current or intangible assets, contributing substantially to a firm's net worth.
Step-by-step explanation:
The statement 'Current assets are the assets that the firm uses to generate most of its income and these assets may be tangible or intangible' is False. Current assets are assets that are expected to be converted into cash, sold or consumed within a year or a normal operating cycle of the business, such as cash, inventory, and accounts receivable. These are needed for the day-to-day operations but don't necessarily account for the majority of a firm's income. The assets that typically generate most of the income for a firm are long-term investments, property, plant, and equipment, as well as intangible assets like patents and trademarks if they are critical to the firm's business.
Using a bank's T-account as a reference, we can see the separation of assets and liabilities. This illustration shows that the assets side includes financial instruments such as reserves, loans, and securities, which can be both current and non-current, while the liabilities and net worth are on the opposite side. Current assets like reserves can be a part of the bank’s assets but are not solely responsible for generating the majority of income.It's important to understand the various types of assets on a balance sheet and how they contribute to the net worth and overall financial health of a firm. Long-term assets and intangible assets, typically missing from the current assets category, are usually geared towards income generation.