A stockholer is an owner of one or more shares of a corporation
Retained earnings are earnings distributed to stockholders
A dividend is an amount earned by a corporation and not yet distributed to stockholders.
A group of persons elected by the stockholders to manage a corporation is called a board of directors.
A board of directors distributes earnings of a corporation to stockholders by declaring a dividend
The purpose of a work sheet is to plan adjustments and summarize their information necessary to prepare financial statments
The steps for preparing a work sheet are similar for proprietorships and corporations
The Supplies-Office account must be adjusted to show the expense of hat supplies that are used during the year
The Prepaid Insurance account is adjusted to show the value of insurance that has been used
During a fiscal period, the amount of merchandise on hand increases and decreases
Assets that will be used for a number of years in the operation of a business are called current assets
Accumulated depreciation is the depreciation expense that has been recorded since the purchase of a plant asset
Federal income tax is an expense of a corporation
When a corporation makes the quarterly payment of estimated federal income tax, the cash account is credited.
Financial statements provide the primary source of information needed by owners and managers to make decisions on the future activity of business.
An income statement is used to report a business's financial progress
An income statement for a merchandising business has three main sections: revenue section, cost of merchandise sold section, and expenses section
Cost of merchandise sold is also known as cost of goods sold
Total expenses on an income statement are deducted from the gross profit on sales to find net income before federal income tax
When a business's expenses are less than the gross profit on sales, the difference is known as a net loss.
Increasing sales revenue while keeping cost of merchandise sold the sale will increase gross profit on sales
A statement of stockholders' equity contains two major sections: capital stock and retained earnings
Data needed to prepare the liabilities section of a balance sheet are obtained from a work sheet
Rules double lines across both amount columns below the Assets section and below the Stockholders' Equity section show that the assets equal liabilities plus owners' equity
General ledger account balances are changed only by posting journal entries
Temporary accounts are closed at the end of a fiscal period to prepare the general ledger for the next fiscal period
The trial balance columns of a work sheet and an income statement contain the information needed to journalize closing entries
The ending account balances of permanent accounts for one fiscal period are the beginning account balances for the next fiscal period.
The income summary account is closed into the retained earnings account
After all closing entries are posted, the income statement accounts are the only general ledger accounts that have balances
The purpose of the post-closing trial balance is to prove the general ledger equality of debits and credits.
An income statement has three main sections for
assets, liabilities and owner's equity
revenue, expenses, and inventory
revenue, cost of merchandise sold, and expenses
owner's equity share of net income, and drawing
cost of merchandise sold is found by taking the amount of beginning merchandice inventory
less purchases plus ending inventory
plus gross profit on sales
less expenses
plus purchases less ending inventory
The revenue remaining after cost of merchandise sold has been deducted is
gross profit on sales
cost of merchandise sold
net sales
total sales
one way to increase gross profit on sales is to
decrease expenses
decrease sales revenue
increase sales revenue
increase cost of merchandise sold
a financial statement that summarizes the changes in a corporation's ownership for a fiscal period is
an income statement
a balance sheet
a statement of stockholder's equity
a distribution of net income statement
a financial statement that reports a corporation's assets, liabilities, and stockholder's equity on a specific date
an income statment
an owner's equity statement
to prepare the corporation's balance sheet, use the information from
the balance sheet columns of your worksheet
the owner's equity statement
both
neither
When information about the account balance of each vendors needed,
an income statement is prepared
a schedule of accounts payable is prepared
a schedule of account receivable is prepared
a distribution of net income statement is prepared
Liabilities owed for more than a year are called
current liabilties
long term liabilities
short term liabiltiies
debs
On an income statement, merchandising businesses report
revenue
all of the above
Total sales less sales discount and sales returns and allowances is called
net profit
net income
none of the above
The two types of journal entries needed to change general ledger account balances at the end of the fiscal period are
adjusting and correcting entries
closing and correcting entries
adjusting and closing entries
Information needed for journalizing adjusting entries is taken from the
Trial Balance columns of a work sheet
Adjustment columns of a work sheet
Income statement columns of a work sheet
Balance Sheet columns of a work sheet
The store supplies inventory adjustment includes a debit to Supplies Expense--Store and a credit to
Income Summary
Merchandise Inventory
Purshases
Supplies--Store
The amounts needed for closing entries are obtained from the work sheet's
Trial Balance and Balance Sheet columns
Adjustments and Balance Sheet columns
Income Statement and Balance Sheet columns
Balance Sheet columns
To close the revenue account, the revenue account balance for the fiscal period is transferred into
the income summary account
the capital accounts
the cash account
To close the sales account
debit Sales; credit cash
debit Sales; credit Income Summary
debit Income Summary; credit Sales
debit Cash; credit Sales
To close the expense and cost accounts
debit the expenses and cost accounts; credit Income Summary
debit the expense accounts; credit the capital accounts
debit Income Summary; credit the expense and cost accounts
debit Income Summary; credit the capital accounts
To close the income summary account when there is net income
debit Cash; credit Income Summary
debit the capital accounts; credit Income Summary
debit Income Summary; credit Retained Earnings
debit Retained Earnings; credit Income Summary
Which journal entires change general ledger account balances at the end of a fiscal period
Adjusting entries
Closing entries
Which balance sheet accounts have up-to-date balances to begin a new fiscal period?
Asset accounts
Liability accounts
Capital Accounts
All of the above
Merchandising businesses use an accounting cycle similar to the accounting cycle of
service businesses
proprietorships
corporations
After adjusting and closing entries have been posted to the general ledger, a
balance sheet is prepared
trial balance is prepared
post-closing balance sheet is prepared
post-closing trial balance is prepared
