Accounting Chapter 7

Information needed to prepare a statement of owner's equity is obtained from a work sheet's Account Title column and

Balance Sheet

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 amount of capital reported on a statement of owner's equity is calculated as

Capital Account Balance + Net Income - Drawing Account Balance

The date on a monthly statement of owner's equity prepared on May 31 is 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--

Balance Sheet: Liabilities

accounts payable

in an income statement to find the total expenses

add them all together

Income statement: Expenses column

advertising expense, cash short and over, insurance expense, Miscellaneous expense, supplies expense, utilities expense,(everything after sales)

total percent of sales

always 100%

A financial road map used by individuals and companies as a guide for spending and saving.

budget

Balance Sheet: Owner's Equity

capital

Balance sheet: Assets

cash, petty cash, acc rec, supplies, and prepaid insurance (everything up to prepaid insurance)

Income statement: Neither Column

cash, petty cash, acc rec, supplies, prepaid insurance, acc pay, capital, drawing , income summary (everything up to income summary)

A negative balance that remains after total expenses are subtracted from total income.

deficit

income statement total expenses %

divide total expenses by revenue

Balance Sheet: Neither Column

drawing, income summary, sales, advertising expense, cash short and over, insurance expense, miscellaneous expense, supplies expense, and utilities expense (everything after capital)

(True or False) The Full Disclosure accounting concept is applied when a company always prepares financial statements at the end of each monthly fiscal period.

false

(True or False) The net income on an income statement is verified by checking the balance sheet.

false

(True or False)An income statement reports information on a specific date indicating the financial condition of a business.

false

(True or False)Financial ratios on an income statement are calculated by dividing sales and total expenses by net income.

false

(True or False)Information needed to prepare a statement of owner's equity is obtained from the balance sheet.

false

(True or False)Internal users of accounting information include company managers, officers, and creditors.

false

(True or False)On the balance sheet, the current capital amount is taken from the work sheet.

false

(True or False)The income statement for a service business has five sections: heading, Revenue, Expenses, Net Income or Net Loss, and Capital.

false

The area of accounting that focuses on reporting information to external users.

financial accounting

A comparison between two components of financial information.

financial ratio

when preparing a balance sheet

look at the balance sheet column of a worksheet

The area of accounting that focuses on reporting information to internal users.

managerial accounting

A budgeting strategy of setting aside at least 10% of after-tax income for saving and investing.

pay yourself first

The calculation and interpretation of a financial ratio.

ratio analysis

The ratio of net income to total sales.

return on sales

Income Statement: Revenue column

sales

Any persons or groups who will be affected by an action.

stake holders

to calculate net income or net loss

subtract revenue from total expenses +=net income -=net loss

A positive balance that remains after total expenses are subtracted from total income.

surplus

(True or False) . A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity.

true

(True or False) An amount written in parentheses on a financial statement indicates a negative amount.

true

(True or False) Information needed to prepare an income statement comes from the Account Title column and the Income Statement columns of a work sheet.

true

(True or False) The income statement's account balances are obtained from the work sheet's Income Statement columns.

true

(True or False) The position of the total asset line on the balance sheet is determined after the Equities section is prepared

true

(True or False)A financial ratio is a comparison between two components of financial information.

true

(True or False)Double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct.

true

(True or False)Double lines ruled across both amount columns of an income statement indicate that the amount has been verified.

true

(True or False)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

(True or False)The statement of owner's equity reports changes in the capital account for a period of time.

true

(True or False)When a business has a net loss, the current capital amount will be less than the capital account balance.

true

(True or False)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