Accounting Chapter 15 Study Guide – Flashcards
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net sales
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Total sales less sales discount and sales returns and allowances
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cost of merchandise sold
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The original price of all merchandise sold during a fiscal period
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gross profit on sales
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The revenue remaining after cost of merchandise sold has been deducted
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financial ratio
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A comparison between two items of financial information
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earnings per share
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The amount of net income after federal income tax belonging to a single share of stock
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price-earnings ratio
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The relationship between the market value per share of a stock
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statement of stockholders' equity
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a financial statement that shows changes in a corporation's ownership for a fiscal period
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par value
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a value assigned to a share of stock and printed on the stock certificate
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current liabilities
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liabilities due within a short time, usually within a year
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long-term liabilities
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liabilities owed for more than a year
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supporting schedule
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a report prepared to give details about an item on a principal financial statement
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true
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T/F: financial statements provide the primary source of information needed by owners and managers to make decisions on the future activity of a business
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false
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T/F: reporting financial information the same way from one fiscal period to the next is an example of the accounting concept adequate disclosure
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true
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T/F: an income statement is used to report a business's financial progress
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true
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T/F: an income statement for a merchandising business has three main sections: revenue section, cost of merchandise sold section, and expenses section
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true
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T/F: cost of merchandise sold is also known as cost of goods sold
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false
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T/F: revenue less cost of merchandise sold equals net income
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true
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T/F: calculating a ratio between gross profit on sales and net sales enables management to compare it's performance to prior fiscal periods
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true
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T/F: total expenses on an income statement are deducted from the gross profit on sales to find net income before federal income tax
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false
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T/F: for a merchandising business, every sales dollar reported on the income statement includes only three components: gross profit on sales, total expenses, and net income
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false
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T/F: when a business's expenses are less than the gross profit on sales, the difference is known as a net loss
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true
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T/F: increasing sales revenue while keeping cost of merchandise sold the same will increase gross profit on sales
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false
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T/F: most businesses correct an unacceptable component percentage for gross profit by simply increasing the markup on merchandise purchased for sale because an increased selling price will always increase profit
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true
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T/F: individual amounts reported on an income statement have little meaning without being compared to another amount
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true
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T/F: a statement of stockholders' equity contains two major sections: (1) capital stock and (2) retained earnings
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true
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T/F: the beginning balance of the capital stock account is the amount of capital stock issued at the beginning of the year
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true
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T/F: the amounts in the capital stock section of the statement of stockholders' equity are obtained from the general ledger account, capital stock
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false
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T/F: net income is shown on the last line of a statement of stockholders' equity
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true
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T/F: some income may be distributed as dividends to provide stockholders with a return on their investments
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true
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T/F: data needed to prepare the liabilities section of a balance sheet are obtained from a work sheet
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true
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T/F: ruled double lines across both amount columns below the Assets section and below the Stockholders' Equity section show that the assets equal liabilities plus owners' equity
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true
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T/F: when more detailed information about an item on a financial statement is needed, a supporting schedule may be prepared
