Accounting Chapter 7
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 date on a monthly balance sheet prepared on July 31 is written as
July 31, 20--
The ratio of net income to total sales.
Return on Sales (ROS)
Examples of external users
bankers, creditors, customers, government agencies, stockholders
Examples of internal users
company managers and officers
The area of accounting that focuses on reporting information to internal users.
managerial accounting
The calculation and interpretation of a financial ratio.
ratio analysis
The amount of capital reported on a statement of owner's equity is calculated as
Capital Account Balance + Net Income - Drawing Account Balance
Information needed to prepare a statement of owner's equity is obtained from
a work sheet's Account Title column and balance sheet columns
A financial road map used by individuals and companies as a guide for spending and saving.
budget
The statement of owner's equity reports changes in the ___________________________________________.
capital account for a period of time.
A negative balance that remains after total expenses are subtracted from total income.
deficit
Information needed to prepare a statement of owner's equity is obtained from the balance sheet.
false
Internal users of accounting information include company managers, officers, and creditors.
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 net income on an income statement is verified by checking the balance sheet.
false
An income statement reports information on a specific date indicating the financial condition of a business.
false (for month ended)
On the balance sheet, the current capital amount is taken from the work sheet.
false (have to actually calculate)
The income statement for a service business has five sections: heading, Revenue, Expenses, Net Income or Net Loss, and Capital.
false (no capital) 2 headings for revenue and expenses
Financial ratios on an income statement are calculated by dividing sales and total expenses by net income.
false (total expense/revenue)
The area of accounting that focuses on reporting information to external users.
financial accounting
A comparison between two components of financial information.
financial ratio
The date on a monthly statement of owner's equity prepared on May 31 is written as
for month ended May 31, 20--
A budgeting strategy of setting aside at least 10% of after-tax income for saving and investing.
pay yourself first
Any persons or groups who will be affected by an action.
stakeholders
A positive balance that remains after total expenses are subtracted from total income.
surplus
A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity.
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 work sheet.
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 a net loss, the current capital amount will be less than the capital account balance.
true
When a business has two different sources of revenue, both revenue accounts are listed on the income statement.
true
Reporting an amount on a financial statement as a percentage of another item on the same financial statement.
vertical analysis
Full Disclosure Principle
when financial statements contain all information necessary to understand a business' financial condition