question

administrative expenses

answer

Costs related to the management of a business

question

base year

answer

a year or period that is used for comparison in financial statement analysis

question

capital stock

answer

the account that represents the total amount of investment in the corporation by its stockholders

question

comparability

answer

the accounting principle that allows the financial information from one period to be compared to that of another period; also, the comparison of financial information of two or more businesses.

question

full disclosure

answer

accounting guideline requiring that a financial report include enough information so that it is complete.

question

gross profit on sales

answer

the amount of profit made during the fiscal period before expenses are deducted; it is found by subtracting the cost of merchandise sold from net sales

question

horizontal analysis

answer

the compares of the same items on financial statements for two or more accounting periods and the analysis of changes from one period to the next.

question

net purchases

answer

the total cost of all merchandise purchased during a fiscal period, less any purchases discounts, returns, or allowances.

question

net sales

answer

the amount of sales for the period less any sales discounts, returns, or allowances.

question

operating expenses

answer

the cash spent or assets consumed to earn revenue for a business; operating expenses do not include federal income tax revenue

question

operating income

answer

the taxable income of a corporation

question

retained earnings

answer

earnings held by a corporation and not paid to stockholders as a return on their investment

question

statement of retained earnings

answer

a statement that reports the changes that have take place in the retained earnings account during the fiscal period; prepared as a supporting document for the balance sheet.

question

stockholders' equity

answer

the value of the stockholders' claims to the assets of the corporation

question

True

answer

T/F: the balance sheet reports the balances of all permanent accounts as of a specific date

question

False

answer

T/F: The balance of the Capital Stock account should change every period

question

True

answer

T/F: The total sales amount of a merchandising business includes the cost of merchandise sold and the profit made from selling that merchandise

question

True

answer

T/F: Transportation charges increase the cost of merchandise purchased during the period

question

False

answer

T/F: The cost of merchandise sold is obtained by subtracting the beginning inventory from the cost of merchandise available for sale

question

True

answer

T/F: The three financial statements prepared by a merchandising corporation are the income statement, the statement of retained earnings, and the balance sheet

question

True

answer

T/F: Federal Corporate Income Tax Expense is not an operating expense because it represents cash paid out as a result of the revenue earned rather than cash spent to earn revenue

question

True

answer

T/F: Financial reports are prepared so that managers can evaluate past decisions and make future decisions

question

False

answer

T/F: The stockholders' equity section of the balance sheet lists the accounts Capita Stock and Cash in Bank

question

False

answer

T/F: The general ledger is the source of information for preparing the financial statements of business

question

True

answer

T/F: The federal income tax amount is listed separately on the income statement so that the operating income can be more easily seen

question

False

answer

T/F: the statement of retained earnings is prepared before the income statement

question

False

answer

T/F: The Balance of the Retained Earnings account will always increase at the end of the period.

question

True

answer

T/F: The income statement reports the balances of the contra revenue accounts Sales Discounts and Sales Returns and Allowances

question

False

answer

T/F: A net loss has no direct effect on the Retained Earnings Account

question

True

answer

T/F: The amount of gross profit for the period is the difference between net sales and the cost of merchandise sold

question

True

answer

T/F: Purchases Returns and Allowances and Purchases Discounts are both contra cost of merchandise accounts

question

False

answer

T/F: The balance sheet is prepared from the information in the Balance Sheet section of the work sheet and from the income statement

question

False

answer

T/F: The statement of retained earnings consists of only the balance of the Retained Earnings account at the beginning of the period plus net income before taxes

question

True

answer

T/F: The balance of all permanent accounts as of a specific date are reported on the balance sheet

question

True

answer

T/F: The statement of retained earnings is prepared before the balance sheet

question

True

answer

T/F:Purchase discounts is a contra account of purchases

question

False

answer

T/F: The account Transportation In reduces the amount of merchandise available for sale

question

False

answer

T/F: The Retained Earnings account always increases at the end of the period

question

False

answer

T/F: The source of information for preparing the income statement is the general ledger

question

False

answer

T/F: Capital Stock is the only general ledger account classified as stockholders' equity

question

True

answer

T/F: the cost of merchandise sold is determined by subtracting the ending inventory from the cost of merchandise available for sale

question

True

answer

T/F: The amount of profit earned before expenses are subtracted is the gross profit on sales

question

False

answer

T/F: Changes in the Cash in Bank account are reported in the statement of retained earnings

question

True

answer

T/F: Net purchases is added to the beginning inventory to get the merchandise available for the sale for the period

question

True

answer

T/F: Corporate Federal Income Tax Expense is not included in the total operating expenses for the period

question

False

answer

T/F: The income statement reports the financial position of the business as of a specific date

question

True

answer

T/F: The balance in the Capital Stock account never changes unless stock in the business is purchased or sold.

Accounting Terms Chapter 19 – Flashcards

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