Name:
Class:
Date:
Indicate whether the statement is true or false.
1. The current owner’s capital amount reported on a statement of owner’s equity is calculated as capital account balance
less drawing account balance less net income.
a.
True
b.
False
2. A balance sheet reports financial information for a specific date.
a.
True
b.
False
3. An income statement reports information for a specific date indicating the financial progress of a business in earning a
net income or a net loss.
a.
True
b.
False
4. If a business has a net loss for the period, expenses should be reported before revenues on the income statement.
a.
True
b.
False
5. 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.
a.
True
b.
False
6. An amount written in parentheses on a financial statement indicates an estimate.
a.
True
b.
False
7. Return on sales (ROS) is the ratio of net income to total sales.
a.
True
b.
False
8. When a business has two different sources of revenue, a separate income statement should be prepared for each kind of
revenue.
a.
True
b.
False
9. A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner’s equity.
a.
True
b.
False
10. The area of accounting that focuses on reporting information to external users is called managerial accounting.
a.
True
b.
False
Name:
Class:
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11. The area of accounting that focuses on reporting information to internal users is called managerial accounting.
a.
True
b.
False
12. The statement of owner’s equity reports information for a period of time.
a.
True
b.
False
13. A financial ratio is a comparison between two components of financial information.
a.
True
b.
False
14. The formula for calculating the total expenses ratio is total expenses divided by net income.
a.
True
b.
False
15. The calculation and interpretation of a financial ratio is called ratio analysis.
a.
True
b.
False
16. The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to
understand a business’s financial condition.
a.
True
b.
False
17. The formula for calculating the net income ratio is net income divided by total sales.
a.
True
b.
False
18. The net income calculated for the income statement and the net income on the work sheet can be different because of
adjusting entries.
a.
True
b.
False
19. For a service business, the revenue reported on an income statement is often compared to two items: total expenses
and net income.
a.
True
b.
False
20. Vertical analysis is reporting an amount on a financial statement as a percentage of another item on the same financial
statement.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
Name:
Class:
Date:
21. An income statement reports a business’s financial
a.
condition over a specific period of time.
b.
progress over a specific period of time.
c.
condition on a specific date.
d.
progress on a specific date.
22. Information needed to prepare an income statement’s Expense section is obtained from a work sheet’s Account Title
column and
a.
Income Statement Debit column.
b.
Income Statement Credit column.
c.
Balance Sheet Debit column.
d.
Balance Sheet Credit column.
23. When preparing a statement of owner’s equity, the amount of the current owner’s capital is calculated using amounts
obtained from
a.
the general ledger.
b.
the income statement.
c.
the journal.
d.
the work sheet.
24. The formula for calculating the net income ratio is
a.
net income divided by total sales.
b.
total sales divided by total expenses.
c.
total sales minus total expenses divided by net income.
d.
none of these.
25. Preparing financial statements at the end of each monthly fiscal period is an application of the accounting concept
a.
Adequate Disclosure.
b.
Going Concern.
c.
Objective Evidence.
d.
Accounting Period Cycle.
26. The date on a monthly income statement prepared on April 30 is written as
a.
April 30, 20—.
b.
For Month Ended April 30, 20—.
c.
20—, April 30.
d.
none of these.
27. Information needed to prepare a balance sheet’s Assets section is obtained from a work sheet’s Account Title column
and
a.
Income Statement Debit column.
b.
Income Statement Credit column.
c.
Balance Sheet Debit column.
d.
Balance Sheet Credit column.
28. The amount of net income calculated on an income statement is correct if
a.
it is the same as the net income shown on the work sheet.
b.
debits equal credits.
c.
it is the same as the net income shown on the balance sheet.
d.
none of these.
29. Assuring that financial statements contain all information necessary to understand a business’s financial condition is
an application of the accounting concept
a.
Adequate Disclosure.
b.
Going Concern.
c.
Objective Evidence.
d.
Accounting Period Cycle.
Name:
Class:
Date:
Name:
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