Unit 7 Review

T/F: Two financial statements are prepared from the information on the worksheet.

True

A financial statement that reports the value of a business's assets, liabilities, and owner's equity on a specific date.

balance sheet

Reporting income when the cash is received and expenses when the cash is paid.

cash basis of accounting

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.

work sheet

T/F: Many businesses choose a one-year fiscal period that ends during a period of high business activity.

False

T/F: Only accounts with a balance are listed in the Trial Balance columns of a work sheet.

False

T/F: Adjusting entries must be posted to the general ledger accounts.

True

T/F: If an amount is written in an incorrect column of a work sheet, the error should be erased and the amount should be written in the correct column.

True

T/F: If the Trial Balance columns are not equal and the difference can be evenly divided by 9, then the error most likely is a transposed number.

True

T/F: Net income on a work sheet is calculated by subtracting the Income Statement Debit column total from the Income Statement Credit column total.

True

T/F: The amount of the supplies 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

T/F: 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

T/F: When the Income Statement Debit column total is greater than the Income Statement Credit column total on a work sheet, the business has a net income.

False

Reporting income when it is earned and expenses when they are incurred.

accrual basis of accounting

Journal entries recorded to update general ledger accounts at the end of a fiscal period.

adjusting entries

The length of time for which a business summarizes financial information and reports its financial performance.

fiscal period

A fiscal period consisting of 12 consecutive months.

fiscal year

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 total expenses when total expenses are greater.

net loss

Cash paid for an expense in one fiscal period that is not used until a later period.

prepaid expense

A proof of the equality of debits and credits in a general ledger.

trial balance