accounting ch7 true 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

For service business, the revenue reported on an income statement includes components for total expenses and net income.

True

The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition.

True

The financial condition of a business refers to its financial strength.

True

The formula for calculating net income is: total revenue minus total expenses equals net income (total revenue-total expenses=net income)

True

The formula for calculating the total expenses component percentage is: total expenses divided by total sales equals total expenses component percentage.

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

The net income calculated for the income statement and the net income on the work sheet must be the same.

True

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

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

A balance sheet has three sections: heading, assets, and liabilities

False

Information needed to prepare an income statement comes from the trial balance columns and the income statement columns of a worksheet.

False

On an income statement, double lines are ruled across both amount columns to indicate that debits equal credits.

False

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 capital amount reported on a balance sheet is calculated at: capital account balance plus drawing account balance less net income.

False

a balance sheet reports financial information over a specific period of time.

False

an amount written in parentheses on a financial statement comes from the trial balance.

False

component percentages on an income statement are calculated by dividing sales and total expenses by net income.

False