Ch. 7 Test Review

A balance sheet reports financial information for a specific date.

• True

• False

A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner’s equity.

• True

• False

A financial ratio is a comparison between two components of financial information.

• True

• False

An amount written in parentheses on a financial statement indicates an estimate.

• True

• False

An income statement reports a business’s...?

• Financial condition over a specific period of time

• Financial progress over a specific period of time

• Financial condition on a specific date

• Financial progress on a specific date

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.

• True

• False

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

If a business has a net loss for the period, expenses should be reported before revenues on the income statement.

• True

• False

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