| Question | Answer |
| Reporting in the same fiscal period the
revenue earned and the expenses
incurred to earn that revenue is an
application of the accounting concept
Matching Expenses with Revenue | 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 formula for calculating
net income is: total revenue
minus total expenses equals
net income. | True |
| The net income calculated for
the income statement and the
net income on the worksheet
must be the same. | True |
| The Adequate Disclosure accounting
concept is applied when financial
statements contain all information
necessary to understand a business's
financial condition. | True |
| On an income statement, double
lines are ruled across both
amount columns to indicate that
debits equal credits. | False |
| For a service business, the revenue
reported on an income statement
includes components for total
expenses and net income. | True |
| The formula for calculating the total
expenses component percentage is:
the total expenses divided by total
sales equals total expenses
component percentage. | True |
| The financial condition
of a business refers to
its financial strength. | True |
| The current capital to be reported on a
balance sheet is calculated as: the
capital account balance plus net
income equals current capital. | False |
| The owner's equity section of a
balance sheet may report different
kinds of details about owner's equity,
depending on the need of the
business. | True |
| Component percentages on an
income statement are calculated
by dividing sales and total
expenses by net income. | False |
| A component percentage is the
percentage relationship between
one financial statement item and
the total that includes that item. | True |
| An income statement reports
information over a period of time,
indicating the financial progress of a
business in earning a net income or
net loss. | True |
| 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 trial
balance columns and the income
statement columns of a work sheet | False |
| An amount written in
parentheses on a financial
statement indicates an
estimate. | False |
| A balance sheet reports
financial information over
a specific period of time. | False |
| A balance sheet reports financial
information on a specific date and
includes the assets, liabilities,
and owner's equity. | True |
| When a business has two different
sources of revenue, a separate
income statement should be prepared
for each kind of revenue. | False |
| The date on a monthly
income statement prepared
on July 31 is written as | For Month Ended
July 31, 20xx |
| The amount of net income
calculated on an income
statement is correct if | it is the same as net
income shown on the
work sheet |
| Preparing financial statements at
the end of each monthly fiscal
period is an application of the
accounting concept | Accounting
Period Cycle |
| Information needed to prepare an
income statement's revenue section is
obtained from a worksheet's Account
Title column and | Income Statement
Credit column |
| A balance sheet
reports a business's
financial | condition on a
specific date |
| When preparing a balance
sheet, the amount of owner's
capital is obtained from | none of these |
| The formula for calculating
the net income component
percentage is | net income divided by total
sales equal net income
component percentage |
| Information needed to prepare a
balance sheet liabilities section is
obtained from a work sheet's
Account Title column and | Balance Sheet
Credit column |
| Assuring that financial statements
contain all information necessary to
understand a business's financial
condition is an application of the
accounting concept | Adequate
Disclosure |
