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Financial Accounting
Chapter 6 Test Study Guide
| Question | Answer |
|---|---|
| The length of time for which a business summarizes its financial information and reports its financial performance. | fiscal period |
| A fiscal period consisting of 12 consecutive months. | fiscal year |
| A columnar accounting form used to summarize the general ledger information needed to prepare financial statements. | worksheet |
| A proof of equality of debits and credits in a general ledger. | trial balance |
| Cash paid for an expense in one fiscal period that is not used until a later period. | prepaid expense |
| Reporting income when it is earned and expenses when they are incurred. | accrual basis of accounting |
| Reporting income when the cash is received and expenses when the cash is paid. | cash basis of accounting |
| Changes recorded on a worksheet to update general ledger accounts at the end of a fiscal period. | adjustments |
| A financial statement that reports assets, liabilities, and owner’s equity on a specific date. | balance sheet |
| A financial statement showing the revenue and expenses for a fiscal period. | income statement |
| The difference between total revenue and total expenses when total revenue is greater. | net income |
| The difference between total revenue and total expenses when total expenses are greater.. | net loss |
| Journal entries recorded to update general ledger accounts at the end of a fiscal period. | adjusting entries |
| The accounting concept Consistent Reporting is being applied when a delivery business reports revenue for the number of deliveries made one year and the amount of revenue received for the deliveries made the next year. | F |
| A fiscal period must be 12 months in length. | F- or longer |
| Journals, ledgers, and worksheets are considered permanent records. | F- worksheets are not |
| The heading on a worksheet contains the name of the business, the name of the report, and the date of the report. | T |
| Only accounts with a balance are listed on a trial balance. | F |
| The four questions asked when analyzing an adjustment are: Why? Where? When? And How? | F-what is the balance? what should should the balance be? what must be done? what is the adjustment? |
| The two accounts affected by the adjustment for supplies are Supplies and Supplies Expense. | T |
| The two accounts affected by the adjustment for insurance are Prepaid Insurance Expenses and Insurance. | F- Insurance Expense |
| The balance in Prepaid Insurance after adjusting entries are recorded represents the amount of insurance premium still remaining. | T |
| Totaling and ruling the Adjustments columns of a worksheet is necessary to prove the equality of debits and credits. | T |
| The income statement and balance sheet are prepared from the Trial Balance columns on the work sheet. | F |
| Net income on a work sheet is calculated by subtracting the Income Statement Debit column total from the Income Statement Credit column total. | T |
| If errors are found on a work sheet, they must be erased and corrected before any further work is completed. | T |
| When two column totals are not in balance on the worksheet, the difference between the two totals is calculated and checked. | T |
| If the difference between the totals of Debit and Credit columns on a worksheet can be evenly divided by 9, then the error is most likely a transposed number. | T |
| If there are errors in the work sheet’s Trial Balance columns, it might be because a general ledger account balance was recorded in the wrong Trial Balance column. | T |
| Most errors occur in doing arithmetic. | T |
| The best way to prevent errors is to use a calculator. | F |
| Adjusting entries must be posted to the general ledger accounts. | T |
| The balance in Supplies Expense after adjusting entries are recorded represents the amount of supplies used during the fiscal period. | T |
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nateharder276