Chapter 7 Accounting Test
A balance sheet reports financial information over a specific period of time.
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Amounts from a work sheet's Trial Balance columns are used in preparing the revenue section of an income statement.
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An amount written in parentheses on a financial statement indicates an estimate.
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Information needed to prepare the assets section of the balance sheet is obtained form the work sheet's Account Title column and the Balance Sheet Credit column.
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On a balance sheet, double lines are ruled across both amount columns to indicate that debits equal credits.
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On an income statement , double lines are ruled across both amount columns to indicate that debits equal credits.
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The income statement for a service business has five sections: heading, revenue, expenses, net income or loss, and capital.
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The net income on an income statement is verified by checking the balance sheet.
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When a business has two different sources of revenue, a separate income statement should be prepared for every kind of revenue.
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A balance sheet reports information about the elements of the accounting equation.
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Amounts from a work sheet's Income Statement Debit column are used in preparing the expense section of an income statement.
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An income statement reports information over a period of time, indicating the financial progress of a business in earning a net income or a net loss.
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For a service business, the revenue reported on an income statement includes components for total expenses and net income.
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Single lines ruled across an amount column of an income statement indicate that amounts are to be added.
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The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial conditions.
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The Matching Expenses with Revenue accounting concept is applied when the revenue earned and the expense incurred to earn that revenue are reported in the same fiscal period.
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The financial condition of a business refers to its financial strength.
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The formula for calculating the total expenses component percentage is: total expenses divided by total sales equals total expenses component percentage.
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The net income calculated for the income statement and the net income on the work sheet must be the same.
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The work sheet is used to assist in preparing the revenue, expenses, and net income sections of an income statement.
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