chapter6and7
| Question | Answer |
|---|---|
| two financial statements are prepared from the information on the work sheet | true |
| net income on a work sheet is calculated by subtracting the income statement credit column total from the income statement debit column total | false |
How many financial statements are prepared from the information on a worksheet?
Two financial statements are prepared from the information on a worksheet (T/F).
Which accounting concept applies when financial statements are prepared from information on the work sheet?
Chapter 8 Accounting Flash Cards
| A | B |
|---|---|
| Accounting Period Cycle | Which accounting concept applies when a work sheet is prepared at the end of each fiscal cycle to summarize the general ledger information needed to prepare financial statments? |
When the income statement debit column total is greater than the income statement credit column total on a worksheet The business has a net income *?
When the Income Statement Credit column total is greater than the Income Statement Debit column total on a work sheet, the business has a net income. Your business has total Sales of $10,000 and total expenses of $8,500 which means your business incurred a net loss.
What worksheet columns would you use to enter a net loss?
(1) If there is a Net Income, then you should have the difference entered in the Dr column of the Income Statement and in the Cr column of the Balance Sheet. (2) If there is a Net Loss, then you should have the difference entered in the Cr column of the Income Statement and in the Dr column of the Balance Sheet.
Where is the source of information needed to prepare the Income Statement is taken from?
Information needed to prepare an income statement comes from the Trial Balance columns and the Income Statement columns of a work sheet.
Which is the most important financial statement Why do you say so?
The most important financial statement for the majority of users is likely to be the income statement, since it reveals the ability of a business to generate a profit. Also, the information listed on the income statement is mostly in relatively current dollars, and so represents a reasonable degree of accuracy.
Is a transaction recorded in the journal?
A transaction is entered in a journal before it is entered in ledger accounts. Because each transaction is initially recorded in a journal rather than directly in the ledger, a journal is called a book of original entry.
What is a income Summary?
Income Summary is a temporary account in which all the closing entries of revenue and expenses accounts are netted at the end of the accounting period, and the resulting balance is considered as profit or loss.
In what columns of the worksheet does net income appear?
The net income appears on a worksheet in the Income Statement Credit column and in the Balance Sheet debit column.
Is net income a debit or credit?
To increase the balance of an asset, we debit that account. Therefore the revenue equal to that increase in cash must be shown as a credit on the income statement. Therefore, net income is debited when there is a profit in order to balance the increase in retained earnings.
Which are the two most important financial statements in accounting?
Another way of looking at the question is which two statements provide the most information? In that case, the best selection is the income statement and balance sheet, since the statement of cash flows can be constructed from these two documents.
Where does the net income appear on a worksheet?
Income Statement Credit column
The net income appears on a worksheet in the Income Statement Credit column and in the Balance Sheet debit column.
What account is income summary?
The income summary account is a temporary account into which all income statement revenue and expense accounts are transferred at the end of an accounting period. The net amount transferred into the income summary account equals the net profit or net loss that the business incurred during the period.
What are the sources of the information needed to prepare the balance sheet?
The documents necessary to prepare balance sheets are, work sheets and statements of change in owners equity. b. To show account names in report form, the title of each section, assets, liabilities or owner’s equity, should be listed in the middle of the first column.
What transactions are recorded in the journal?
Examples of transactions recorded in the general journal are asset sales, depreciation, interest income and interest expense, and stock sales.
What is the process of recording a transaction in the journal called?
The process of recording the transactions in a journal is called as journalizing.
Is income Summary a debit or credit?
The Income Summary will be closed with a debit for that amount and a credit to Retained Earnings or the owner’s capital account. If the Income Summary has a debit balance, the amount is the company’s net loss.
When preparing financial statements the fill in the blank is always prepared first?
1. Income statement. The financial statement prepared first is your income statement. As you know by now, the income statement breaks down all of your company’s revenues and expenses.
In which Balance Sheet column is net loss recorded on the work sheet?
In which Balance Sheet column do you record net loss on the work sheet? Balance Sheet Debit column.
When accounts are arranged in a general ledger?
The procedure of arranging accounts in a general ledger, assigning account numbers, and keeping records current is known as file maintenance. Account numbers may be assigned by 10s so that new accounts can be added easily.
What is the correct order in which to prepare the three financial statements?
Financial statements are compiled in a specific order because information from one statement carries over to the next statement. The trial balance is the first step in the process, followed by the adjusted trial balance, the income statement, the balance sheet and the statement of owner’s equity.
How are financial statements of a business concern prepared?
The balance sheet is prepared from the balance sheet columns of the worksheet. Financial statements of a business concern mean income statement, retained earnings statement/owners’ equity statement and balance sheet prepared at the end of the accounting period.
How is an income statement prepared in a worksheet?
The worksheet contains all the information for preparing financial statements. The income statement is prepared with data of debit and credit columns of the income statements of the worksheet. The balance sheet is prepared from the balance sheet columns of the worksheet.
Is it easy to prepare a financial statement from a worksheet?
Prepare financial statements from a worksheet is relatively easy because all necessary accounting information is properly presented and structured in the worksheet. The worksheet contains all the information for preparing financial statements.
How are the three financial statements related to each other?
The three financial statements are: (1) the Income Statement, (2) the Balance Sheet, and (3) the Cash Flow Statement. These three core statements are intricately linked to each other and this guide will explain how they all fit together. By following the steps below you’ll be able to connect the three statements on your own.
