Exam 7: Financial Statements for a Proprietorship

The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition.

Assuring that financial statements contain all information necessary to understand a business's financial condition is an application of the accounting concept

The formula for calculating the net income ratio is net income divided by total sales.

Preparing financial statements at the end of each monthly fiscal period is an application of the accounting concept

The 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.

For a service business, the revenue reported on an income statement is often compared to two items: total expenses and net income.

Return on sales (ROS) is the ratio of net income to total sales.

When preparing a statement of owner's equity, the amount of the current owner's capital is calculated using amounts obtained from

The net income calculated for the income statement and the net income on the work sheet can be different because of adjusting entries.

The area of accounting that focuses on reporting information to external users is called managerial accounting.

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

The date on a monthly income statement prepared on April 30 is written as

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

An income statement reports a business's financial

The formula for calculating the net income ratio is

The formula for calculating the total expenses ratio is total expenses divided by net income.

Information needed to prepare an income statement's Expense section is obtained from a work sheet's Account Title column and

Information needed to prepare a balance sheet's Assets section is obtained from a work sheet's Account Title column and

The area of accounting that focuses on reporting information to internal users is called managerial accounting.

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.