Part One Identifying Accounting Concepts and Practices

Transcription

1 tudy Guide 7 ame dentifying ccounting Concepts and Practices nalyzing an ncome tatement nalyzing Procedures Part One dentifying ccounting Concepts and Practices Directions: Place a for rue or an for alse in the nswers column to show whether each of the following statements is true or false. Perfect core 20 Pts. 15 Pts. 5 Pts. Chapter 7 inancial tatements for a Proprietorship Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. otal 1. he ull Disclosure accounting concept is applied when a company always prepares financial statements at the end of each monthly fiscal period. (p. 190) 2. nternal users of accounting information include company managers, officers, and creditors. (p. 190) 3. n income statement reports information on a specific date indicating the financial condition of a business. (p. 192) 4. he Matching Expenses with Revenue accounting concept is applied when the revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal period. (p. 192) 5. nformation needed to prepare an income statement comes from the ccount itle column and the income tatement columns of a work sheet. (p. 192) 6. he income statement for a service business has five sections: heading, Revenue, Expenses, et ncome or et Loss, and Capital. (p. 192) 7. he income statement s account balances are obtained from the work sheet s ncome tatement columns. (p. 192) 8. he net income on an income statement is verified by checking the balance sheet. (p. 194) 9. Double lines ruled across both amount columns of an income statement indicate that the amount has been verified. (p. 194) 10. financial ratio is a comparison between two components of financial information. (p. 195) 11. inancial ratios on an income statement are calculated by dividing sales and total expenses by net income. (p. 195) 12. o company should have a vertical analysis ratio for total expenses higher than 48.0%. (p. 196) 13. When a business has two different sources of revenue, both revenue accounts are listed on the income statement. (p. 197) 14. n amount written in parentheses on a financial statement indicates a negative amount. (p. 197) 15. balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner s equity. (p. 199) 16. balance sheet reports information about the elements of the accounting equation. (p. 201) 17. he owner s capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance, less net income. (p. 202) 18. he position of the total asset line on the balance sheet is determined after the Equities section is prepared. (p. 202) 19. Double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct. (p. 202) 20. he owner s equity section of a balance sheet is the same for all businesses. (p. 203) 40 Pts. Your core nswers

2 Part wo nalyzing an ncome tatement Directions: he parts of the income statement below are identified with capital letters. Decide the location of each of the following items. Print the letter identifying your choice in the nswers column. B C D G E H % O LE J K L M O (pp ) 1. Date of the income statement. 2. Heading of Expenses section. 3. tatement name. 4. Expense account titles. 5. Expense account balances. 6. he amount of net income or loss. 7. Heading of Revenue section. 8. et income ratio (or return on sales). 9. Revenue account title. 10. Words otal Expenses. 11. Business name. 12. otal amount of revenue. 13. otal amount of expenses. 14. Words et ncome or et Loss. 15. otal expenses ratio. nswers 1. C 2. G 3. B 4. H M 7. D 8. O 9. E 10. J K 14. L Working Papers E 2014 Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

3 ame Date Class Part hree nalyzing Procedures Directions: or each of the following items, select the choice that best completes the statement. Print the letter identifying your choice in the nswers column. 1. he date on a monthly balance sheet prepared on July 31 is written as () or Month Ended July 31, 20-- (B) July 31, 20-- (C) 20--, July 31 (D) none of the above. (p. 199) 2. nformation needed to prepare a balance sheet s ssets section is obtained from a work sheet s ccount itle column and () ncome tatement Debit column (B) ncome tatement Credit column (C) Debit column (D) Credit column. (p. 201) 3. nformation needed to prepare a balance sheet s liabilities section is obtained from a work sheet s ccount itle column and () ncome tatement Debit column (B) ncome tatement Credit column (C) Debit column (D) Credit column. (p. 201) 4. he amount of capital reported on a balance sheet is calculated as () Capital ccount Balance + et ncome Drawing ccount Balance (B) Capital ccount Balance et ncome Drawing ccount Balance (C) Capital ccount Balance + et ncome + Drawing ccount Balance (D) Capital ccount Balance et ncome + Drawing ccount Balance. (p. 202) 5. f a business wanted to show how the current capital balance was calculated, it would () only list net income on the balance sheet (B) only list net income and withdrawals on the balance sheet (C) list only the beginning capital balance on the balance sheet (D) list the beginning capital balance, the net income, the withdrawals, and the ending capital balance on the balance sheet. (p. 203) nswers 1. B 2. C 3. D D Chapter 7 inancial tatements for a Proprietorship Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

4 2 3 P 1 R Y C B U D E C G 5 Y O U R O L L 8 U E R E U R O E L E Y 9 V E R C P C L C L Y O U U 10 K E H O L D E R R 11 M G E R L C C O U G cross 6. negative balance that remains after total expenses are subtracted from total income. 8. he ratio of net income to total sales. 9. Reporting an amount on a financial statement as a percentage of another item on the same financial statement. 10. ny persons or groups who will be affected by an action. 11. he area of accounting which focuses on reporting information to internal users. Down 1. he calculation and interpretation of a financial ratio. 2. he area of accounting which focuses on reporting information to external users. 3. budgeting strategy of setting aside at least 10% of after-tax income for saving and investing. 4. financial road map used by individuals and companies as a guide for spending and saving. 5. comparison between two components of financial information. 7. positive balance that remains after total expenses are subtracted from total income. 146 Working Papers E 2014 Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

5 ame Date Class 7-1 WORK OGEHER, p. 198 Preparing an income statement CCOU LE COME EME Debit credit Debit credit 12 ales dvertising Expense Cash hort and Over nsurance Expense Miscellaneous Expense upplies Expense Utilities Expense et ncome Hair Care alon ncome tatement or Month Ended May 31, Revenue: % O LE ales Expenses: dvertising Expense Cash hort and Over 3 00 nsurance Expense Miscellaneous Expense upplies Expense Utilities Expense otal Expenses et ncome Chapter 7 inancial tatements for a Proprietorship Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

6 7-1 O YOUR OW, p. 198 Preparing an income statement CCOU LE COME EME Debit credit Debit credit 12 ales dvertising Expense Cash hort and Over nsurance Expense Miscellaneous Expense upplies Expense Utilities Expense et ncome Plumbing olutions ncome tatement or Month Ended ebruary 28, Revenue: % O LE ales Expenses: dvertising Expense Cash hort and Over 1 00 nsurance Expense Miscellaneous Expense upplies Expense Utilities Expense otal Expenses et ncome Working Papers E 2014 Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

7 ame Date Class 7-2 WORK OGEHER, p. 205 Preparing a balance sheet CCOU LE 7 8 Debit credit 1 Cash Petty Cash ccounts Receivable G. Mackermann ccounts Receivable R. Whu upplies Prepaid nsurance ccounts Payable Belmont upplies ccounts Payable Lurgert Paints Dwight undeen, Capital Dwight undeen, Drawing et ncome ll Pro Painters pril 30, ssets Liabilities Cash ccts. Pay. Belmont upplies Petty Cash ccts. Pay. Lurgert Paints ccts. Rec. G. Mackermann otal Liabilities ccts. Rec. R. Whu Owner s Equity upplies Dwight undeen, Capital Prepaid nsurance otal ssets otal Liabilities and Owner s Equity Chapter 7 inancial tatements for a Proprietorship Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

8 7-2 O YOUR OW, p. 205 Preparing a balance sheet CCOU LE 7 8 Debit credit 1 Cash Petty Cash ccounts Receivable unshine Café ccounts Receivable Dependable Cleaners upplies Prepaid nsurance ccounts Payable Computer upplies Co ccounts Payable Westside upplies Eva elsen, Capital Eva elsen, Drawing et ncome Computer Repair October 31, ssets Liabilities Cash ccts. Pay. Computer upplies Co Petty Cash ccts. Pay. Westside upplies ccts. Rec. unshine Café otal Liabilities ccts. Rec. Dependable Cleaners Owner s Equity upplies Eva elsen, Capital Prepaid nsurance otal ssets otal Liabilities and Owner s Equity Working Papers E 2014 Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

9 ame Date Class 7-1 PPLCO PROBLEM (LO1, 2), p. 208 Preparing an income statement 1., 2. Lincoln Lawn ervice ncome tatement or Month Ended January 31, % O LE Revenue: ales Expenses: dvertising Expense Cash hort and Over 2 00 nsurance Expense Miscellaneous Expense upplies Expense Utilities Expense otal Expenses et ncome Chapter 7 inancial tatements for a Proprietorship Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

10 7-2 PPLCO PROBLEM (LO3), p. 208 Preparing a balance sheet Lee s Home Repair January 31, ssets Liabilities Cash ccts. Pay. uperior upplies Petty Cash ccts. Pay. Media Plus ccts. Rec. J. Greenstein otal Liabilities upplies Owner s Equity Prepaid nsurance imothy Lee, Capital otal ssets otal Liabilities and Owner s Equity Working Papers E 2014 Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

11 ame Date Class 7-M MERY PROBLEM (LO1, 2, 3), p. 209 Preparing financial statements with a net loss 1., 2. Eiler Copy ervice ncome tatement or Month Ended eptember 30, % O LE Revenue: ales Expenses: dvertising Expense Cash hort and Over 1 00 nsurance Expense Miscellaneous Expense upplies Expense Utilities Expense otal Expenses et Loss ( ) (14.1) 3. Eiler Copy ervice eptember 30, ssets Liabilities Cash ccts. Pay. upplies Plus Petty Cash Owner s Equity ccts. Rec.. Romano Cheryl Eiler, Capital upplies Prepaid nsurance otal ssets otal Liabilities and Owner s Equity Chapter 7 inancial tatements for a Proprietorship Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

12 7-C CHLLEGE PROBLEM (LO1, 2, 3), p. 210 Preparing financial statements with two sources of revenue and a net loss 1., 2. cow rt chool ncome tatement or Month Ended October 31, % O LE Revenue: ales Lessons ales Group Classes Expenses: dvertising Expense nsurance Expense Miscellaneous Expense Rent Expense upplies Expense otal Expenses et Loss ( ) (14.5) 3. cow rt chool October 31, ssets Liabilities Cash ccts. Pay. ampa upply ccts. Rec. J. Holben ccts. Pay. upply Depot upplies otal Liabilities Prepaid nsurance Owner s Equity Greg cow, Capital otal ssets otal Liabilities and Owner s Equity Working Papers E 2014 Cengage Learning. ll Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.