accounting chapter 7 true-false

Question 1

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

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

Answer 2

false

Question 3

The statement of owner’s equity reports changes in the capital account for a period of time.

Answer 3

true

Question 4

Information needed to prepare a statement of owner’s equity is obtained from the balance sheet.

Answer 4

false

Question 5

When a business has a net loss, the current capital amount will be less than the capital account balance.

Answer 5

true

Question 6

On the balance sheet, the current capital amount is taken from the work sheet.

Answer 6

false

Question 7

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

Answer 7

false

Question 8

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 8

true

Question 9

Information needed to prepare an income statement comes from the Account Title column and the income Statement columns of a work sheet.

Answer 9

true

Question 10

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

Answer 10

false

Question 11

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

Answer 11

true

Question 12

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

Answer 12

false

Question 13

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

Answer 13

true

Question 14

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

Answer 14

true

Question 15

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

Answer 15

false

Question 16

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

Answer 16

true

Question 17

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

Answer 17

true

Question 18

A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner’s equity.

Answer 18

true

Question 19

The position of the total asset line on the balance sheet is determined after the Equities section is prepared.

Answer 19

true

Question 20

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

Answer 20

true