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Accouting Chap. 7
accounting chaoter 7
| Question | Answer |
|---|---|
| 1. 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 income statement's account balances are obtained from the work sheet's Income Statement columns. (p. 192) | True |
| 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 |
| No company should have a vertical analysis ratio for total expenses higher than 48.0%. (p. 196) | 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 financial information on a specific date and includes the assets, liabilities, and owner's equity. (p. 199) | 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 |
| The position of the total asset line on the balance sheet is determined after the Equities section is prepared. (p. 202) | True |
| 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 |
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Sydneydennis