Accounting Chapter 7

A balance sheet has three sections: Heading, assets, and liabilities.

False

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

False

An amount written in parentheses on a financial staement indicates an estimate.

False

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

False

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

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 as: capital account balance plus drawing account balance less net income

False

When a buisiness has two different sources of revenue, a seperate income statement should be prepared for each kind of revenue

False

A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity.

True

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 a net loss.

True

For a service buisness, the revvenue reported on an income statement includes components for a 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 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 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.

True

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

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

changes recorded on a work sheet 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

the length of time for which a business summarizes and reports financial information

fiscal period

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 expenses for a fiscal period

net loss

a proof of the equality of debits and credits in a general ledger

trial balance

a columnar accounting form used to summarize the general ledger information needed to prepare financial statements

work sheet