chapter 7 & 8

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true
T or F: for a service business, the revenue reported on an income statement is often compared to 2 items: total expenses and net income
false
T or F: the net income calculated for the income statement and the net income on the work sheet can be different because of adjusting entries
false
T or F: an amount written is parentheses on a financial statement indicates an estimate
true
T or F: the formula for calculating the net income ratio is net income divided by total sales
true
T or F: the area of accounting that focuses on reporting information to internal users is called managerial accounting
false
T or F: when a business has two different sources of revenue, a separate income statement should be prepared for each kind of revenue
true
T or F: 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
false
T or F: if a business has a net loss for the period, expenses should be reported before revenues on the income statement
true
T or F: the owner’s capital amount reported on a balance sheet is calculated as capital account balance less drawing account balance plus net income
false
T or F: the area of accounting that focuses on reporting information to external users is called managerial accounting
true
T or F: a balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner’s equity
false
T or F: the formula for calculating the total expenses ratio is total expenses divided by net income
true
T or F: a financial ratio is a comparison between two components of financial information
true
T or F: the calculation and interpretation of a financial ratio is called ratio analysis
true
T or F: a balance sheet reports financial information for a specific date
false
T or F: an income statement reports information for a specific date indicating the financial progress of a business in earning a net income or a net loss
true
T or F: the adequate disclosure accounting concept is applied when financial statements contain all information necessary to understand a business’s financial condition
true
T or F: vertical analysis is reporting an amount on a financial statement as a percentage of another item on the financial statement
true
T or F: 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 period
true
T or F: return on sales (ROS) is the ratio of net income to total sales
for month ended April 30, 20–
The date on a monthly income statement prepared on April 30 is written as
it is the same as a net income shown on the worksheet
The amount of net income calculated on an income statement is correct if
accounting period cycle
preparing financial statements at the end of each monthly fiscal period is an application of the accounting concept
income statement debit column
information needed to prepare an income statements expense section is obtained from the worksheets account titled column and
progress over a specific period of time
an income statement reports of business’s financial
The general ledger, the journal, and the income statement
what three places is the amount of the owner’s capital not obtained from when preparing a balance sheet
net income divided by total sales
The formula for calculating the net income ratio is
balance sheet debit column
information needed to prepare a balance sheets assets section is obtained from a worksheets account title column and
adequate disclosure
assuring that financial statements contain all information necessary to understand the business’s financial condition is an application of the accounting concept
false
T or F: temporary accounts include assets, expenses, and the owners drawing account
true
T or F: temporary accounts are also call nominal accounts
true
T or F: Journal entries used to prepare temporary accounts for a new fiscal period are closing entries
false
T or F: The balances of the liability accounts must be reduced to zero to prepare the accounts for the next period
false
T or F: permanent accounts are used to accumulate information until it is transferred to the owners capital account
true
T or F: The capital accounts new balance after all closing entries are posted is verified by checking it with the amount of capital shown on the balance sheet at the end of the fiscal period
true
T or F: The ending account balances a permanent accounts for one fiscal period are the beginning account balances for the next fiscal period
false
T or F: the income summary account has a normal debit balance
true
T or F: A post closing trial balance verifies the equality of debits and credits in a general ledger after the closing entries are posted
true
T or F: to close a temporary account, an amount equal to its balance is recorded in the account on the side opposite to its balance
true
T or F: The series of accounting activities include in recording financial information for fiscal period is called an accounting cycle
false
T or F: The drawing account is a permanent account
true
T or F: temporary accounts must start each fiscal period with a zero balance
false
T or F: at the end of the fiscal period, the balances of permanent accounts are summarized and transferred to the owners capital account
assets, liabilities, and owners capital
The accounts that appear on the post closing trial balance are
prepare a post closing trial balance
The last step in the accounting cycle is to
temporary account
what kind of account is income summary
The income summary account has a debit balance
when the total expenses are greater than the total revenues,
permanent accounts
accounts used to accumulate information from one fiscal period to the next are
on the balance sheet for the fiscal period
after the closing entries are posted the owners capital account balance should be the same as shown
zero
after closing entries are posted, the balance in the owners drawing account should be
zero balance
temporary accounts begin each new fiscal period with a
debit income summary; credit owners capital
The journal entry used to close income summary when there is a net income is

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