Accounting Financial Statements and Reporting Concepts

chapter6and7 Question the length of time for which a business summarizes and reports financial information a columnar accounting form used to summarize the general ledger information needed to prepare financial statements a proof of equality of debits and credits in a general ledger changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period a financial statement that reports assets, liabilities, and owner's equity on a specific date a financial statement showing the revenue and expenses for a fiscal period the difference between total revenue and total expenses when total revenue is greater the difference between total revenue and total expenses when total expenses are greater the accounting concept consistent reporting is being applied when a delivery business reports revenue for the number of deliveries made one year and the amount of revenue received for the deliveries made the next year an accounting period is also known as a fiscal period journals, ledgers, and work sheets are considered permanent records all general ledger account titles are listed on a trial balance in the same order as listed on the chart of accounts the four questions asked when analyzing an adjustment are: why? where? when? and how? the two accounts affected by the adjusment for supplies are supplies and supplies expense the two accounts affected by the adjustment for insurance are prepaid insurance expense and insurance totaling and ruling the adjustment columns of a work sheet are necessary to prove the equality of debits and credits two financial statements are prepared from the information on the work sheet net income on a work sheet is calculated by subtracting the income statement credit column total from the income statement debit column total if errors are found on a work sheet, they must be erased and corrected before any further work is completed when two column totals are not in balance on the work sheet, the difference between the two totals is calculated and checked if the difference between the totals of debit and credit columns on a work sheet can be evenly divided by 9, then the error is most likely in addition if there are errors in the work sheet's trial balance columns, it might be because not all general ledger account balances were copied in the trial balance column correctly errors in general ledger accounts should never be erased most errors occur in doing arithmetic the best way to prevent errors is to use a calculator the adequate disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial statments 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 revenue earned and the expenses incurred 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 columns 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 Answer fiscal period work sheet trial balance adjustments balance sheet income statement net income net loss false true false true false true false true true false true true false true true true false true true true true false false true false 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 calculated by dividing sales and total expenses by net income all companies should have a total expenses component percnetage that is not more than 80% when a business has two different sources of revenue, a seperate income statement should be prepared for each kind of revenure an amount written in parentheses on a financial statement indicates an estimate a balance sheet reprts 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 owner's capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance, less net income the position of the total asset line on the balance sheet is determined after the equities section is prepared double lines are ruled across the balance sheet columns to show that the coulmn 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 true true false false false false true true false true rue true