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Chapter 7
Accouting
| Question | Answer |
|---|---|
| The income statement's account balances are obtained from the work sheet's Income Statement columns. (p. 192) | true |
| No company should have a vertical analysis ratio for total expenses higher than 48.0%. (p. 196) | false |
| A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity. (p. 199) | true |
| The position of the total asset line on the balance sheet is determined after the Equities section is prepared. (p. 202) | true |
| The Full Disclosure accounting concept is applied when a company always prepares financial statements at the end of each monthly fiscal period. (p. 190) | false |
| Internal users of accounting information include company managers, officers, and creditors. (p. 190) | false |
| An income statement reports information on a specific date, indicating the financial condition of a business. (p. 192) | 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 period. (p. 192) | true |
| Information needed to prepare an income statement comes from the Account Title column and the Income Statement columns of a work sheet. (p. 192) | true |
| The income statement for a service business has five sections: heading, Revenue, Expenses, Net Income or Net Loss, and Capital. (p. 192) | false |
| The net income on an income statement is verified by checking the balance sheet. (p. 194) | false |
| Double lines ruled across both amount columns of an income statement indicate that the amount has been verified. (p. 194) | true |
| A financial ratio is a comparison between two components of financial information. (p. 195) | true |
| Financial ratios on an income statement are calculated by dividing sales and total expenses by net income. (p. 195) | false |
| When a business has two different sources of revenue, both revenue accounts are listed on the income statement. (p. 197) | true |
| An amount written in parentheses on a financial statement indicates a negative amount. (p. 197) | true |
| A balance sheet reports information about the elements of the accounting equation. (p. 201) | true |
| The owner's capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance less net income. (p. 202) | false |
| Double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct. (p. 202) | true |
| The Owner's Equity section of a balance sheet is the same for all businesses. (p. 203) | false |
| The date on a monthly balance sheet prepared on July 31 is written as | July 31, 20-- |
| Information needed to prepare a balance sheet's Assets section is obtained from a work sheet's Account Title column and | Balance Sheet Debit column |
| Information needed to prepare a balance sheet's Liabilities section is obtained from a work sheet's Account Title column and | Balance Sheet Credit column. |
| The amount of capital reported on a balance sheet is calculated as | Capital Account Balance + Net Income – Drawing Account Balance |
| If a business wanted to show how the current capital balance was calculated, it would | list the beginning capital balance, the net income, the withdrawals, and the ending capital balance on the balance sheet. |
| A negative balance that remains after total expenses are subtracted from total income. | deficit |
| The ratio of net income to total sales. | return on sales |
| Reporting an amount on a financial statement as a percentage of another item on the same financial statement. | vertical analysis |
| Any persons or groups who will be affected by an action. | stake holders |
| The area of accounting that focuses on reporting information to internal users. | managerial accounting |
| A positive balance that remains after total expenses are subtracted from total income. | surplus |
| A comparison between two components of financial information. | financial ratio |
| A financial road map used by individuals and companies as a guide for spending and saving. | budget |
| A budgeting strategy of setting aside at least 10% of after-tax income for saving and investing. | pay yourself first |
| The area of accounting that focuses on reporting information to external users | financial accounting |
| The calculation and interpretation of a financial ratio. | ratio analysis |
Created by:
kyleighjordyne
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