Accounting Chapter 15 TRUE/FALSE
True
A statement of stockholders' equity contains two major sections: (1) capital stock and (2) retained earnings.
True
An income statement for a merchandising business has three main sections: revenue section, cost of merchandise sold section, and expenses section.
True
An income statement is used to report a business's financial progress.
True
Calculating a ratio between gross profit on sales and net sales enables management to compare its performance to prior fiscal periods.
True
Cost of merchandise sold is also known as cost of goods sold.
True
Data needed to prepare the liabilities section of a balance sheet are obtained from a work sheet.
True
Financial statements provide the primary source of information needed by owners and managers to make decisions on the future activity of a business.
False
For a merchandising business, every sales dollar reported on the income statement includes only three components: gross profit on sales, total expenses, and net income.
True
Increasing sales revenue while keeping cost of merchandise sold the same will increase gross profit on sales.
True
Individual amounts reported on an income statement have a little meaning without being compared to another amount.
False
Most businesses correct an unacceptable component percentage for gross profit by simply increasing the markup on merchandise purchased for sale because an increased selling price will always increase profit.
False
Net income is shown on the last line of a statement of stockholders' equity.
False
Reporting financial information the same way from one fiscal period to the next is an application of the accounting concept Adequate Disclosure.
False
Revenue less cost of merchandise sold equals net income.
True
Ruled double lines across both amount columns below the Assets section and below the Stockholders' Equity section show that the assets equal liabilities plus owners' equity.
True
Some income may be distributed as dividends to probide stockholders with a return on their investments.
True
The amounts in the capital stock section of the statement of stockholders' equity are obtained from the general ledger account, Capital Stock.
True
The beginning balance of the capital stock account is the amount of capital stock issued at the beginning of the year.
True
Total Expenses on an income statement are deducted from the gross profit on sales to find net income before federal income tax.
False
When a business's expenses are less than the gross profit on sales, the difference is known as a net loss.