Accounting Chapter 7 – Flashcards

The Full Disclosure accounting concept is applied when a company always prepares financial statements at the end of each monthly fiscal period.

Internal users of accounting information include company managers, officers, and creditors.

An income statement reports information on specific date indicating the financial condition of the business.

The matching expenses with the revenue accounting concept is applied when the revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal period.

information needed to prepare an income statement comes from the account title column and the income statement columns of a work sheet

the income statement for a service business have 5 sections: heading, revenue, expenses, net income, net loss, and capital

the income statement's account balances are obtained form the work sheet's income statement columns

the net income on an income statement is verified by checking the balance sheey

double lines ruled across both amount columns of an income statement indicate that the amount has been verified

a financial ratio is a comparison between two components of financial information.

financial ratios on an income statement are calculated by diving sales and total expenses by net income

no company should have a vertical analysis ratio for total expenses higher than 48.0%

when a business has two different sources of revenue, both revenue accounts are listed on the income statement.

an account written in parentheses on a financial statement indicates a negative amount

a balance sheet reports financial information on a specific date and includes the assests, liabilities, and owners equity

a balance sheet reports information about the elements of the accounting equation

double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct

the owner's equity section of a balance sheet is the same for all business

a negative balance that remains after total expenses are subtracted from total income

the ratio of net income to total sales

reporting an amount on a financial statement as a percentage of another item on the same financial statement

any persons or groups who will be affected by the action

the area of accounting which focuses on reporting information to internal users

the calculation and interpretation of a financial ratio

the area of accounting which focuses on reporting information to external users

a budgeting strategy of setting aside at least 10% of after tax income for saving and investing

a financial road map used by individuals and companies as a guide for spending and saving

a comparison between two components of financial information

a positive balance that remains after total expenses are subtracted from total income

how to find the net income of an income statement

what is the total expenses ratio

what is the net income ratio

how to find the current capital

how to find the current capital with a net loss