Accounting Ch. 7 True/ False ***
Terms in this set (20)
The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition.
Stakeholders are any persons or groups who will be affected by an action.
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.
The Matching Expenses with Revenue accounting concept is applied when the revenueearned and the expenses insurred to earn that revenue are reported in the same fiscal period.
Information needed to prepare an income statement comes from the trial balance columns and the income statement coumns of a work sheet.
The income statement for a service business has five sections: heading, revenue, expenses, net income or loss, and capital.
The income statement's account balances are obtained from the work sheet's Income Statement columns.
The net income on an income statement is verified by checking the balance sheet.
Single lines ruled across an amount column of an income statement indicate that amounts are to be added.
A component percentage is the percentage relationship between one financial statement item and the total that includes that item.
Component percentages on an income statement are calcualted by dividine sales and total expenses by net income.
ALl companies should have a toal expenses component percentage that is not more than 80.0%.
When a business has two different sources of revenue, a seperate income statement should be prepeared for each kind of revenue.
An amount written in parentheses on a finalcial statement indicates an estimate.
A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity.
A balance sheet reports information about the elements of the accounting equation.
The owners capital amount reported on a balance sheet is calcualted as: capital account balance plus drawing account balance, less net income.
The position of the total asset line on the balance sheet is determines after the eqauities section is prepared.
Double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct.
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.
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