Chapter 7 Accounting Study Guide True and False

Information needed to prepare a balance sheet's Liabilities section is obtained from a work sheet's Account Title column and

Balance Sheet Credit Column

Information needed to prepare a balance sheet's Assets section is obtained from a work sheet's account title column and

Balance Sheet Debit Column

The amount of capital recorded on a balance sheet is calculated as

Capital Account Balance + Net Income - Drawing Account Balance

An income statement reports information on a specific date indicating the financial condition of a business.

False

Financial ratios on an income statement are calculated by dividing sales and total expenses by net income.

False

Internet users of accounting information include company managers, officers, and creditors

False

No company should have vertical analysis ratio for totals higher than 48.0%.

False

The Full Disclosure accounting concept is applied when a company always prepares financial statements at the end of each monthly fiscal period

False

The Owner's Equity section of a balance sheet is the same for all businesses.

False

The income statement for a service business has five sections: heading, Revenue, Expenses, Net Income or Loss, and Capital.

False

The net income on an income statement is verified by checking the balance sheet.

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

The date on a monthly balance sheet prepared on July 31st is written as

July 31, 20--

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

True

A balance sheet reports information about the elements of the accounting equation.

True

A financial ratio is a comparison between two components of financial information.

True

An amount written in parentheses on a financial statement indicates a negative amount.

True

Double lines are ruled across the Balance Sheet columns to show that the column totals have been verified as correct.

True

Double lines ruled across both amount columns of an income statement indicate that the amount has been verified.

True

Information needed to prepare an income statement comes from the Account Title column and the Income Statement columns of a worksheet.

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 income statement's account balances are obtained from the work sheet's Income Statement columns.

True

The position of the total asset line on the balance sheet is determined after the Equities section is prepared.

True

When a business has two different sources of revenue, both revenue accounts are listed on the income statement.

True

If a business wanted to show how the current capital balance was calculated, it would

list the beginning of the capital balance, the net income, the withdrawals, and the ending capital balance on the balance sheet