Chapter 6

Reporting income when the cash is received and expenses when the cash is paid is called.....

cash basis of accounting

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements is called....

worksheet

If an amount is written in an incorrect column on a worksheet, a line should be drawn through the incorrect amount and the correct amount should be written in he correct column.

False

Journals, ledgers, and worksheets are considered permanent records.

False

Many businesses choose a one-year fiscal period that ends during a period of high business activity.

False

Only accounts with a balance are listed in the Trial Balance columns of a worksheet.

False

Adjusting entries must be posted to the general ledger accounts.

True

If an amount is written in an incorrect column of a worksheet, the error should be erased and the amount should be written in the correct column.

True

If the Trial Balance columns are not equal and the difference can be evenly divided by 9, then the error most likely is a transposed number.

True

If the Trial Balance columns are not equal and the difference is $50, the error most likely is a $25 amount written in the wrong column.

True

Net Income on a worksheet is calculated by subtracting the Income Statement Debit column total from the Income Statement Credit column total.

True

The amount of supplies used during a fiscal period is an expense.

True

The two accounts affected by the adjustment for supplies are Supplies and Supplies Expense

True

Changes recorded on a worksheet to update general ledger accounts at the end of a fiscal period is called....

adjustments

A financial statement that reports the value of a business's assets, liabilities, and owner's equity on a specific date is called...

balance sheet

The balance of the Supplies account plus the value of the supplies on hand equals the up-to-date balance of the Supplies account.

False

When the Income Statement Debit column total is greater than the Income Statement Credit column total on a worksheet, the business has a net income.

False

Two financial statements are prepared from the information on the worksheet.

True

Reporting income when it is earned and expenses when they are incurred is called....

accrual basis of accounting

Journal entries recorded to update general ledger accounts at the end of a fiscal period is called....

adjusting entries

The length of time for which a business summarizes financial information and reports its financial performance is called...

fiscal period

A fiscal period consisting of 12 consecutive months is called....

fiscal year

A financial statement showing the revenue and expenses for a fiscal period is called....

income statement

The difference between total revenue and total expenses when total revenue is greater is called...

net income

The difference between total revenue and total expenses when total expenses are greater is called...

net loss

Cash paid for an expense in one fiscal period that is not used until a later period is called....

prepaid expenses

A proof of the equality of debits and credits in a general ledger is called...

trial balance