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____ summarize the changes resulting from business transactions that have occurred during an accounting period.
____ summarize the changes resulting from business transactions that have occurred during an accounting period.
Financial statements
One source of information for completing the balance sheet is the ____.
One source of information for completing the balance sheet is the ____.
Balance Sheet section of worksheet
A(n) ____ is the financial statement that reports the final balances in all asset, liability, and owner's equity accounts at the end of the accounting period.
A(n) ____ is the financial statement that reports the final balances in all asset, liability, and owner's equity accounts at the end of the accounting period.
Balance sheet
____ indicates what percentage of net sales represents profit.
____ indicates what percentage of net sales represents profit.
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The ____ is completed as a support document for the balance sheet.
The ____ is completed as a support document for the balance sheet.
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The information needed to prepare the income statement comes from the ____.
The information needed to prepare the income statement comes from the ____.
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____ is a comparison of two items on a financial statement, resulting in a percentage that is used to evaluate the relationship between the two items.
____ is a comparison of two items on a financial statement, resulting in a percentage that is used to evaluate the relationship between the two items.
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The ____ reports a business's net income or net loss over an entire accounting period.
The ____ reports a business's net income or net loss over an entire accounting period.
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The balance sheet reports financial information ____.
The balance sheet reports financial information ____.
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In the ____, the classifications of balance sheet accounts are shown one under the other.
In the ____, the classifications of balance sheet accounts are shown one under the other.
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____ is reported on the income statement.
____ is reported on the income statement.
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A net income will increase the owner's capital account.
A net income will increase the owner's capital account.
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Financial reports are often prepared in pencil.
Financial reports are often prepared in pencil.
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Net income or net loss is the difference between total revenue and total expenses over a specific period of time.
Net income or net loss is the difference between total revenue and total expenses over a specific period of time.
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Return on sales is calculated by dividing net sales by net income.
Return on sales is calculated by dividing net sales by net income.
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The balance sheet is prepared before the statement of changes in owner's equity.
The balance sheet is prepared before the statement of changes in owner's equity.
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The balance sheet reports the final balances of the permanent accounts at the end of the fiscal period.
The balance sheet reports the final balances of the permanent accounts at the end of the fiscal period.
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The changes in the Cash in Bank account are reported in the statement of changes in owner's equity.
The changes in the Cash in Bank account are reported in the statement of changes in owner's equity.
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The first amount column on the income statement is used to record revenue and the second amount column is used to record expenses.
The first amount column on the income statement is used to record revenue and the second amount column is used to record expenses.
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The heading is the same on all three financial statements.
The heading is the same on all three financial statements.
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The income statement represents the basic accounting equation.
The income statement represents the basic accounting equation.
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The information on the statement of changes in owner's equity is used in preparing the income statement.
The information on the statement of changes in owner's equity is used in preparing the income statement.
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The net income or net loss reported on the income statement must be the same as the net income or net loss calculated on the work sheet.
The net income or net loss reported on the income statement must be the same as the net income or net loss calculated on the work sheet.
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The primary financial statements prepared for a sole proprietorship are the income statement and the balance sheet.
The primary financial statements prepared for a sole proprietorship are the income statement and the balance sheet.
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The revenue, expense, and the Income Summary accounts are included on the statement of changes in owner's equity.
The revenue, expense, and the Income Summary accounts are included on the statement of changes in owner's equity.
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The statement of changes in owner's equity summarizes the effects on the capital account of the various business transactions that occurred during the period.
The statement of changes in owner's equity summarizes the effects on the capital account of the various business transactions that occurred during the period.
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The Trial Balance section of the work sheet provides the information used in preparing the income statement.
The Trial Balance section of the work sheet provides the information used in preparing the income statement.
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Study Notes
Financial Statements
- Financial statements summarize changes from business transactions over an accounting period.
- Common forms include the balance sheet, income statement, and statement of changes in owner's equity.
Balance Sheet
- The balance sheet reports final balances in all asset, liability, and owner's equity accounts at the end of the accounting period.
- It presents financial information as of a specific date.
- Can be displayed in report form, with account classifications listed vertically.
Income Statement
- Reports a business's net income or net loss over an entire accounting period.
- Contains information necessary for preparation sourced from the Income Statement section of the worksheet.
- The first amount column records revenue, while the second column is for expenses.
Statement of Changes in Owner's Equity
- Supports the balance sheet by detailing changes in the capital account due to various business transactions during the period.
Ratios and Measurements
- Return on sales indicates the percentage of net sales that translates to profit and is calculated as net income divided by net sales.
- Ratio analysis compares two financial items to illustrate their relationship, often expressed as a percentage.
Capital Changes
- Net income increases the owner's capital account, while net loss decreases it.
- The income statement’s net income or loss must match the Worksheet's calculations for consistency.
True/False Concepts
- Financial reports should not be prepared in pencil.
- The balance sheet is completed after the statement of changes in owner's equity.
- The net income or loss reported is the difference between total revenue and expenses over the accounting period.
- The heading format is consistent across the three primary financial statements: income statement, balance sheet, and statement of changes in owner's equity.
- The statement of changes in owner's equity excludes revenue, expense, and Income Summary accounts, which are included in the income statement.
Key Takeaways
- Understanding the purpose and structure of various financial statements is crucial for assessing business performance.
- Knowing how to interpret net income, balance sheet data, and ratios plays an essential role in financial analysis.
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Description
Enhance your understanding of key concepts in Accounting Chapter 9 with these flashcards. Each card focuses on essential terms like financial statements and balance sheets, summarizing crucial definitions. Perfect for reviewing and reinforcing your knowledge before the test.
