True or False
The statement of owner’s equity reports changes in the capital account for a period of time.
True
What are the five sections of an income statement?
Heading, Revenue, Expenses, Net Income/Net Loss, Capital
What does a balance sheet report?
Assets, liabilities, and owner’s equity
What does the statement of owner’s equity show?
Changes in capital for a period of time
Who are internal users of accounting information?
Managers and officers
What indicates a negative amount on financial statements?
Parentheses
An income statement reports financial information on a specific date indicating financial condition.
False
Where are income statement account balances obtained from?
Income Statement columns of the worksheet
A balance sheet reports information for:
A specific date
If a business has a net loss, what happens to capital?
Capital decreases
What accounting concept requires important information to be reported?
Full Disclosure
What verifies net income on a worksheet?
Balance sheet columns
A financial ratio is a comparison between two components of financial information.
True
What does “Net Income” mean?
Revenue is greater than expenses
Which worksheet column provides information for the Assets section?
Balance Sheet Debit column
What information is needed to prepare a statement of owner’s equity?
Account Title column and Balance Sheet columns
What is a financial ratio?
Comparison between two financial components
What are the two major sections of equities on a balance sheet?
Liabilities and Owner’s Equity
An amount written in parentheses on a financial statement indicates a negative amount.
True
What does an income statement report?
Revenue, expenses, and net income/loss for a period of time
Which worksheet column provides information for the Liabilities section?
Balance Sheet Credit column
How is capital calculated when there is a net loss?
Capital − Net Loss − Drawing
Why are financial ratios useful?
They help analyze business performance
What is another name for return on sales?
Net income ratio
The Matching Expenses with Revenue concept means expenses and revenue are reported in different fiscal periods.
False
What accounting concept applies when revenue earned and expenses incurred are reported in the same fiscal period?
Matching Expenses with Revenue
What do double lines on a balance sheet indicate?
Totals have been verified as correct
How is the date written on a monthly statement of owner’s equity?
For Month Ended ___
When a business has multiple revenue sources, what happens on the income statement?
Both revenue accounts are listed
Explain the difference between an income statement and a balance sheet.
Income statement reports revenue/expenses over a period of time; balance sheet reports assets, liabilities, and owner’s equity on a specific date.