Accounting Ch16 Review

Financial statements provide the primary source of information needed by owners and managers to make decisions on the future activity of a business.

• True
• False

Reporting financial information the same way from one fiscal period to the next is an application of the accounting concept Adequate Disclosure.

• True
• False

An income statement for a merchandising business has four main sections: operating revenue, cost of merchandise sold, operating expenses, and other revenue.

• True
• False

The amount of sales, less sales discounts, returns, and allowances is called gross profit.

• True
• False

Cost of merchandise sold is also known as cost of goods sold.

• True
• False

All the information required to prepare a statement of stockholders' equity is obtained from the income statement and the adjusted trial balance.

• True
• False

A statement of stockholder's equity contains two major sections: 1) Capital Stock and 2) Retained Earnings

• True
• False

On an income statement, vertical analysis percentages are calculated by dividing the amount on each line by the amount of operating expenses.

• True

• False

Net income is shown on the last line of a statement of stockholders' equity.

• True
• False

The amount of dividends reported on a statement of stockholders' equity is obtained from the adjusted trial balance.

• True
• False