Accounting Ch. 7 True/ False *** – Flashcards
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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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Stakeholders are any persons or groups who will be affected by an action.
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TRUE
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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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The Matching Expenses with Revenue accounting concept is applied when the revenueearned and the expenses insurred to earn that revenue are reported in the same fiscal period.
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TRUE
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Information needed to prepare an income statement comes from the trial balance columns and the income statement coumns of a work sheet.
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FALSE
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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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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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The net income on an income statement is verified by checking the balance sheet.
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FALSE
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Single lines ruled across an amount column of an income statement indicate that amounts are to be added.
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TRUE
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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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Component percentages on an income statement are calcualted by dividine sales and total expenses by net income.
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FALSE
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ALl companies should have a toal expenses component percentage that is not more than 80.0%.
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FALSE
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When a business has two different sources of revenue, a seperate income statement should be prepeared for each kind of revenue.
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FALSE
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An amount written in parentheses on a finalcial statement indicates an estimate.
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FALSE
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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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A balance sheet reports information about the elements of the accounting equation.
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TRUE
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The owners capital amount reported on a balance sheet is calcualted as: capital account balance plus drawing account balance, less net income.
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FALSE
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The position of the total asset line on the balance sheet is determines after the eqauities section is prepared.
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TRUE
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Double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct.
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TRUE
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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
