Accounting Chapter 6 & 7
a financial statement that reports assets, liabilities, and owner's equity on a specific date
balance sheet
a columnar accounting form used to summarize the general ledger information needed to prepare financial statements
work sheet
A balance sheet has three sections: Heading, assets, and liabilities.
False
A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity.
False
An amount written in parentheses on a financial staement indicates an estimate.
False
Component percentages on an income statement are calculated by dividing sales and total expenses by net income.
False
Information needed to prepare an income statement comes from the trial balance columns and the income statemnt columns of a work sheet.
False
Many businesses choose a one-year fiscal period that ends during a period of high business activity
False
Net income on a work sheet is calculated by subtracting the Income Statement Credit column total from the Income Statement Debit column total.
False
A balance sheet reports financial information over a specific period of time.
True
A component percentage is the percentage relationship between one financial statement item and the total that includes that item.
True
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.
True
For a service buisness, the revvenue reported on an income statement includes components for a total expenses and net income.
True
If an amount is written in an incorrext column on a work sheet, 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 is $50.00, the error most likely is a $25.00 amount written in the wrong column
True
If there are errors in the work sheet's trail Balance columns, it might be because not all general ledger account balances were copied in the Trial Balance column correctly.
True
Making adjustments to general ledger accounts is an application of the Matching Expenses with Revenue accounting concept
True
On an income statement, double lines are ruled across both amount columns to indicate that debits equal credits.
True
The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition.
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 financial condition of a business refers to its financial strength
True
The formula for calculating net income is: total revenue minus total expenses equals net income.
True
The formula for calculating the total expenses component percentage is: total expenses divided by total sales equals total expenses component percentage.
True
The net income calculated for the income statement and the net income on the work sheet must be the same.
True
The owner's equity section of a balance sheet may report different kinds of details about owner's equity, depending on the need of the business.
True
The value of the prepaid insurance coverage used during a fiscal period is an expense.
True
changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period
adjustments
The accounting concept Consistent Reporting is being applied when a word processing service business reports revenue per page one year and revenue per hour the next year.
False
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
The current capital to ve reported on a balance sheet is calculated as: the capital account balance plus net income equals current capital
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
When a buisiness has two different sources of revenue, a seperate income statement should be prepared for each kind of revenue
False
Two financial statements are prepared from the information on the work sheet
True
When the Income Statement Credit column total is greater than the Income Statement Debit column total on a work sheet, the business has a net income
True
the length of time for which a business summarizes and reports financial information
fiscal period
a financial statement showing the revenue and expenses for a fiscal period
income statement
the difference between total revenue and total expenses when total revenue is greater
net income
the difference between total revenue and expenses for a fiscal period
net loss
a proof of the equality of debits and credits in a general ledger
trial balance
