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Accounting 101

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QuestionAnswer
A primary purpose of the work sheet is to serve as an aid in the preparation of the financial statements. True
An income statement shows the sources of revenue, types of expenses, and the amount of the net income or net loss for the period. True
The purpose of an income statement is to provide information on the status of a business at a specified date. False
The single-step form of income statement lists all revenue items and their totals first, followed by all expense items and their totals, to produce a difference that is either net income or net loss. True
The multiple-step form of income statement shows operating income separate from other revenue and other expenses. True
Gross sales less sales returns and allowances is called net sales. True
Net sales plus cost of merchandise sold is called gross profit. False
Gross margin and gross profit mean the same thing. True
Gross profit less operating expenses produces the income from operations. True
The statement of owner's equity summarizes all changes in the owner's equity during the period. True
A formal statement of the changes in owner's equity during an accounting period is called a statement of financial position. False
The purpose of a balance sheet is to summarize the results of operations during an accounting period. False
A formal statement of assets, liabilities, and owner's equity of a business on a specified date is known as a balance sheet. True
The information needed in journalizing the closing entries is obtained from the ??? (not income statement) True
After the temporary owner's equity and drawing accounts are transferred to the permanent owner's equity account, which of the following accounts will have a balance? Owners Capital
Assets that are used in the operation of a business are called temporary investments. False
Accumulated depreciation amounts are shown as deductions from the ???(not A/P)
The third step in the closing process is to transfer the balance in which of the following accounts to the permanent owner's equity account? Income Summary
The purpose of the post-closing trial balance is to prove that the general ledger is in balance at the beginning of the new accounting period. ???
Current liabilities are those obligations that are due within one year or the normal operating cycle of the business, whichever is longer, and will require no use of current assets. False
The cost of a building less its accumulated depreciation represents the undepreciated cost. True
Created by: Yolanda1812
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