Accounting Ch. 7 Study Guide – Flashcards
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True or False: The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition
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True
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True or False: Stakeholders are any persons or groups who will be affected by an action
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True
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True or False: An income statement reports information over a period of time, indicating the financial progress of a business in earning a net income or a net loss
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True
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True or False: The Matching Expenses with revenue accounting concept is applied when the revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal periods
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True
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True or False: Information needed to prepare an income statement comes from the trial balance columns and the income statement columns of a work sheet
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False
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True or False: The income statement for a service business has five sections: heading, revenue, expenses, net income or loss, and capital
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False
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True or False: The income statement's account balances are obtained from the work sheet's Income Statement columns
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True
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True or False: The net income on an income statement is verified by checking the balance sheet
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False
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True or False: Single lines ruled across an amount column of an income statement indicated that amounts are to be added
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True
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True or False: A component percentage is the percentage relationship between one financial statement item and the total that includes that item
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True
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True or False: Component percentages on an income statement are calculated by dividing sales and total expenses by net income
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False
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True or False: All companies should have a total expenses component percentage that is not more than 80.0%
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False
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True or False: When a business has to different sources of revenue, a separate income statement should be prepared for each kind of revenue
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False
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True or False: An amount written in parentheses on a financial statement indicated an estimate
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False
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True or False: A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity
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True
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True or False: A balance sheet reports information about the elements of the accounting equation
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True
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True or False: The owners capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance, less net income
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False
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True or False: The position of the total asset line on the balance sheet is determined after the equities section is prepared
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True
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True or False: Double lines are ruled across the balance sheet columns to show that the column totals have been verifies as correct
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True
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True or False: The owner's equity section of a balance sheet may report different kinds of details about owner's equity, depending on the need of the business
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True
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The date on a monthly income statement prepared on July 31 is written as _____.
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For Month Ended July 31
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Information needed to prepare an income statement's revenue section is obtained from a work sheet's Account Title column and _____.
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Income Statement Credit colum
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Information needed to prepare an income statement's expense section is obtained from a work sheet's Account Title column and _____.
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Income Statement Debit column
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The amount if net income calculated on an income statement is correct if _____.
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it is the same as net income shown on the work sheet
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The formula for calculating the net income component percentage is _____.
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net income divided by total sales equals net income component percentage.
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True or False: A balance sheet has three sections: heading, assets, liabilities
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False
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True or False: The owner's capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance less net income
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False
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True or False: The formula for calculating net income is: total revenue minus total expenses equals net income
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True
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True or False: The net income calculated for the income statement and the net income on the work sheet must be the same
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True
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True or False: On an income statement, double lines are ruled across both amount columns to indicated the debits equal credits
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True
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True or False: For a service business, the revenue reported on an income statement includes components for total expenses and net income
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True
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True or False: The formula for calculating the total expenses component percentage is: total expenses divided by total sales equals expenses component percentage
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True
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True or False: The financial condition of a business refers to its financial strength
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True
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True or False: The current capital to be reported on a balance sheet is calculated as: the capital account balance plus net income equals currents capital
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False
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True or False: The owner's equity section of a balance sheet may report different kinds of details abut owner's equity, depending on the need of the business
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True
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True or False: Component percentages on an income statement are calculated by diving sales and total epexnses by net income
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False
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True or False: A component percentages is the percentage relationship between one financial statement item and the total that includes that item
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True
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True or False: An income statement reports information over a period of time, indicating the financial progress of a business in earning a net income or a net loss
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True
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True or False: An amount written in parentheses on a financial statement indicates an estimate
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False
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True or False: A balance sheet reports financial information over a specific period of time
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False
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True or False: When a business has two different source of revenue, a separate income statement should be prepared for each kinda of revenue
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False
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Preparing financial statements at the end of each monthly fiscal period is an application of the accounting concept _____.
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Accounting Period Cycle
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A balance sheet reports a business's financial _____.
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condition on a specific date
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When preparing a balance sheet, the amount of owner's capital is calculated using amount obtained from _____.
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the work sheet's Balance Sheet columns
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Information needed to prepare a balance sheet liabilities section is obtained from a work sheet's Account Title and _____.
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Balance Sheet Credit column
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Assuring the financial statements contain all information necessary to understand a business's financial condition is an application of the accounting concept _____.
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Adequate Disclosure
