Accounting: Unit 7
budget
A financial road map used by individuals and companies as a guide for spending and saving.
Statement of Owner's Equity
A financial statement that reports the changes in the capital account for a proprietorship for a period of time.
deficit
A negative balance that remains after total expenses are subtracted from total income.
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
account receivable
Balance sheet- assets
account payable
Balance sheet- liabilities
The amount of capital recorded on a statement of owner's equity 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
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
On the balance sheet, the current capital amount is taken from the work sheet.
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 income statement for a service business has five sections: heading, Revenue, Expenses, Net Income or Net Loss, and Capital.
False
The net income on an income statement is verified by checking the balance sheet.
False
interim financial statements
Financial statements providing information for a time period shorter than the fiscal year.
The date on a monthly statement of owner's equity prepared on May 31is written as
For Month Ended May 31, 20--
The date on a monthly balance sheet prepared on July 31 is written as
July 31, 20--
A financial ratio is a comparison between two components of financial information.
TRue
Return on Sales (ROS)
The ratio of net income to total sales.
A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity.
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
The statement of owner's equity reports changes in the capital account for a period of time.
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
Financial ratio
a comparison between two components of financial information
surplus
a positive balance that remains after total expenses are subtracted from total income
Stakeholders
any persons or groups who will be affected by an action
vertical analysis
reporting an amount on a financial statement as a percentage of another item on the same financial statement
Financial Accounting
the area accounting which focuses on reporting information to external users.
Managerial Accounting
the area of accounting that focuses on reporting information to internal users
ratio analysis
the calculation and interpretation of a financial ratio
