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AccountingChapter7
True/False
True | False |
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The Full Disclosure accounting concept is applied when a company always prepares financial statements at the end of each monthly fiscal period. | False |
Internal users of accounting information include company managers, officers, and creditors. | False |
An income statement reports information on a specific date, indicating the financial condition of a business. | 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. | True |
Information needed to prepare an income statement comes from the Account Title column and the Income Statement columns of a work sheet. | True |
The income statement for a service business has five sections: heading, Revenue, Expenses, Net Income or Net Loss, and Capital. | False |
The income statement's account balances are obtained from the work sheet's Income Statement columns. | True |
The net income on an income statement is verified by checking the balance sheet. | False |
Double lines ruled across both amount columns of an income statement indicate that the amount has been verified. | True |
A financial ratio is a comparison between two components of financial information. | True |
Financial ratios on an income statement are calculated by dividing sales and total expenses by net income. | False |
No company should have a vertical analysis ratio for total expenses higher than 48.0%. | False |
When a business has two different sources of revenue, both revenue accounts are listed on the income statement. | True |
An amount written in parentheses on a financial statement indicates a negative amount. | True |
A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity. | True |
A balance sheet reports information about the elements of the accounting equation. | True |
The owner's capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance less net income. | False |
The position of the total asset line on the balance sheet is determined after the Equities section is prepared. | True |
Double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct. | True |
The Owner's Equity section of a balance sheet is the same for all businesses. | False |