Chapter 7 - Accounting 1

The date on a monthly income statement prepared on April 30 is written as

• April 30, 20--.
• For Month Ended April 30, 20--.
• 20--, April 30.
• none of these.

The amount of net income calculated on an income statement is correct if

• it is the same as the net income shown on the work sheet.
• debits equal credits.
• it is the same as the net income shown on the balance sheet.
• none of these.

Preparing financial statements at the end of each monthly fiscal period is an application of the accounting concept

• Adequate Disclosure.
• Going Concern.
• Objective Evidence.
• Accounting Period Cycle.

Information needed to prepare an income statement’s Expense section is obtained from a work sheet’s Account Title column and

• Income Statement Debit column.
• Income Statement Credit column.
• Balance Sheet Debit column.
• Balance Sheet Credit column.

An income statement reports a business’s financial

• condition over a specific period of time.
• progress over a specific period of time.
• condition on a specific date.
• progress on a specific date.

When preparing a balance sheet, the amount of owner’s capital is calculated using amounts obtained from

• the general ledger.
• the income statement.
• the journal.
• none of these.

The formula for calculating the net income ratio is

• net income divided by total sales.
• total sales divided by total expenses.
• total sales minus total expenses divided by net income.
• none of these.

Information needed to prepare a balance sheet’s Assets section is obtained from a work sheet’s Account Title column and

• Income Statement Debit column.
• Income Statement Credit column.
• Balance Sheet Debit column.
• Balance Sheet Credit column.

Assuring that financial statements contain all information necessary to understand a business’s financial condition is an application of the accounting concept

• Adequate Disclosure.
• Going Concern.
• Objective Evidence.
• Accounting Period Cycle.

For a service business, the revenue reported on an income statement is often compared to two items: total expenses and net income.

• true
• false