Unit 7

Question 1

(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

Answer 1

False

Question 2

(True or False)

Internal users of accounting information include company managers, officers, and creditors

Answer 2

False

Question 3

(True or False)

An income statement reports information on a specific date indication the financial condition of a business

Answer 3

False

Question 4

(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

Answer 4

True

Question 5

(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

Answer 5

True

Question 6

(True or False)

The income statement for a service business has five sections: Heading, Revenue, Expenses, Net Income or Net Loss, and Capital

Answer 6

False

Question 7

(True or False)

The Income statement’s account balances are obtained from the work sheet’s Income Statement columns

Answer 7

True

Question 8

(True or False)

The net income on an income statement is verified by checking the balance sheet.

Answer 8

False

Question 9

(True or False)

Double lines ruled across both amount columns of an income statement indicate that the amount has been verified.

Answer 9

True

Question 10

(True or False)

A financial ratio is comparison between two components of financial information.

Answer 10

True

Question 11

(True or False)

Financial ratios on an income statement are calculated by dividing sales and total expenses by net income.

Answer 11

False

Question 12

(True or False)

No company should have a vertical analysis ratio for total expenses higher than 48.0%

Answer 12

False

Question 13

(True or False)

When a business has two different sources of revenue, both revenue accounts are listed on the income statement

Answer 13

True

Question 14

(True or False)

An amount written in parentheses on a financial statement indicates a negative amount

Answer 14

True

Question 15

(True or False)

The owner’s capital amount reported on balance sheet is calculated as: capital account balance plus drawing account balance, less income.

Answer 15

False

Question 16

(True or False)

A balance sheet reports information about elements of the accounting equation

Answer 16

True

Question 17

(True or False)

The owner’s capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance, less net income

Answer 17

False

Question 18

(True or False)

the position of the total asset line on the balance sheet is determined after the equities section prepared

Answer 18

True

Question 19

(True or False)

Double lines are ruled across the Balance Sheet columns to show that the column totals have been verified as correct

Answer 19

True

Question 20

(True or False)

The owner’s equity section of a balance sheet is the same for all businesses

Answer 20

False

Question 21

Vocab:

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

Answer 21

Deficit

Question 22

Vocab:

The ratio of net income to total sales

Answer 22

Return on Sales

Question 23

Vocab:

Reporting an amount on a financial statement as a percentage of another item on the same financial statement

Answer 23

Vertical analysis

Question 24

Vocab:

Any persons or groups who will be affected by an action

Answer 24

Stakeholders

Question 25

Vocab:

The area of accounting which focuses on reporting information to internal users

Answer 25

Managerial accounting

Question 26

Vocab:

The calculation and interpretation of a financial ratio

Answer 26

Fundamental analysis

Question 27

Vocab:

The area of accounting which focuses on reporting information to external users

Answer 27

Financial accounting

Question 28

Vocab:

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

Answer 28

Budget

Question 29

Vocab:

A comparison between two components of financial information

Answer 29

Financial ratio

Question 30

Vocab:

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

Answer 30

Surplus