Accounting Chapter 7 true false
1. The Full Disclosure accounting concept is applied when a company always prepares financial statements at the end of each monthly fiscal period. (p. 190)
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10. The income statement for a service business has five sections: heading, Revenue, Expenses, Net Income or Net Loss, and Capital. (p. 192)
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12. The net income on an income statement is verified by checking the balance sheet. (p. 194)
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15. Financial ratios on an income statement are calculated by dividing sales and total expenses by net income. (p. 195)
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2. Internal users of accounting information include company managers, officers, and creditors. (p. 190)
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4. Information needed to prepare a statement of owner's equity is obtained from the balance sheet. (p. 190).
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6. On the balance sheet, the current capital amount is taken from the work sheet. (p. 192)
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7. An income statement reports information on a specific date indicating the financial condition of a business. (p. 192)
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11. The income statement's account balances are obtained from the work sheet's Income Statement columns. (p. 192)
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13. Double lines ruled across both amount columns of an income statement indicate that the amount has been verified. (p. 194)
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14. A financial ratio is a comparison between two components of financial information. (p. 195)
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16. When a business has two different sources of revenue, both revenue accounts are listed on the income statement. (p. 197)
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17. An amount written in parentheses on a financial statement indicates a negative amount. (p. 197)
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18. A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity. (p. 199)
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19. The position of the total asset line on the balance sheet is determined after the Equities section is prepared. (p. 202)
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20. Double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct. (p. 202)
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3. The statement of owner's equity reports changes in the capital account for a period of time. (p. 190).
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5. When a business has a net loss, the current capital amount will be less than the capital account balance. (p. 192)
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8. 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. (p. 192)
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9. Information needed to prepare an income statement comes from the Account Title column and the Income Statement columns of a work sheet. (p. 192)
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