18 Questions
What is the total amount of the monthly utilities bill Boa received from Municipal Gas?
$395
What is another term for fiscal period?
Financial period
How often do public companies that trade their shares on stock exchanges typically issue financial statements?
Quarterly
What is the concept that requires expenses to be recorded in the same period as the revenue they helped to earn?
Matching principle
What is the main purpose of dividing the fiscal period into equal time periods?
To measure the financial progress of a business
According to the revenue recognition principle, when must revenue be recorded?
In the exact period that it is earned
What is a commonality between the Income Statement and the Balance Sheet?
They are both formal statements seen by important people for the business
What is included in the Income Statement?
Revenue and Expenses
What is the purpose of the Chart of Accounts?
To list and organize ledger accounts and their numbers
What is the revenue recognition principle?
Revenue is recorded when the transaction is completed.
What type of account would be credited when E.Boa sends a bill to J.Basso for her services?
Revenue
When is the Income Statement typically prepared?
At the end of a specific month or period
What is the effect of E.Boa's transaction with J.Basso on the Balance Sheet?
Assets increase and Equity increases.
How are the total numbers presented in the Income Statement?
With a single line above and a double line below the total
What is excluded from the new expanded equity account?
Capital and Drawings
What type of account would be debited when E.Boa pays the monthly rent?
Expenses
What is the classification of E.Boa's transaction with B.Singh?
Credit transaction
What is the effect of E.Boa writing a cheque for the monthly rent payment on the Income Statement?
Expenses increase, Net Income decreases.
Study Notes
Fiscal Period
- The fiscal period is a specific length of time used to calculate Net Income, also known as the financial period or accounting period.
- The standard fiscal period is one year, but public companies may issue quarterly statements (every three months) to keep investors informed.
Generally Accepted Accounting Principles
- The Time Period concept states that accounting takes place over specific time periods, known as fiscal periods, which are of equal length.
- The Matching principle ensures that each expense item related to revenue earned is recorded in the same period as the revenue it helped to earn.
- Revenue must be recorded in the exact period it is earned.
Income Statement
- The Income Statement is a formal statement that summarizes a company's activity over a specific period.
- The header includes "Month ended [date]" to indicate the period covered.
- The statement follows the same formatting rules as a Balance Sheet, including single lines above and below totals, and dollar signs on the first revenue, expense, and net income.
Chart of Accounts
- A Chart of Accounts is a list of ledger accounts and their numbers, arranged in ledger order.
Equity Transactions and Accounting Principles
- Revenue transactions: E.Boa receives $450 in cash for services provided to J.Basso.
- Revenue recognition principle: requires revenue to be recorded when the transaction is completed, and the seller has no other significant obligation.
- Expense transactions: E.Boa writes a $3300 cheque for the monthly rent payment.
This quiz covers the concepts of fiscal period, net income, and accounting period in chapter 5 of Accounting 1, 7th Edition. It also touches on the topic of utility bills and their payment.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
