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hayley731
on FreezingBlue Flashcards.
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Financial statements provide the primary source of info ceeded by owners and managers to make decisions on the future activity of a business.
True
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Reporting financial info the same way from one fiscal period to the next is an application of the accounting concept Adequate Disclosure.
False
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An income statement is used to report a business's financial progress.
True
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An income statement for a merchandising business has 3 man sections: revenue, cost of merchandise sold section, and expenses section.
True
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Cost of merchandise sold is also known as cost of goods sold.
True
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Revenue less cost of merchandise sold equals net income.
False
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Calculating a ratio between gross profit on sales and net sales enables management to compare its performance to prior fiscal periods.
True
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Total expenses on an income statement are deduted form the gross profit on sales to find net income before federal income tax.
True
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For a merchandising business, every sales dollar reported on the income statement includes only 3 components: gross profit on sales, total expenses, and net income.
False
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When a business's expenses are less than the gross profit on sales, the difference is known as a net loss.
False
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Increasing sales revenue while keeping cost of mercandise sold the same will increase gross profit on sales.
True
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Most businesses correct an unacceptable component percentage for gross profit by simply increasing the markup on merchandise purchased for sale because an increased selling price will always increase profit.
False
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Individual amounts reported on an income statement have little meaning without being compared to another amount.
True
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A statement of stockholders' equity contains 2 major sections: 1.) capital stock and 2.) retained earnings.
True
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The beginning balance of a capital stock account is the amount of capital stock issured at the beginning of the year.
True
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The amounts in the capital stock section of hte statement of stockholders' equity are obtainedfrom the general ledger account, Capital Stock.
True
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Net income is shown on the last line of a statement of stockholders' equity.
False
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Some income may be distributed as dividends to provide stockholders with a return on their investments.
True
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Data needed to prepare the liabilities section of a balance sheet are obtained from a work sheet.
True
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Ruled double lines across both amount columns below the Assets section and below the Stockholers' Equity section show that the assets equal liabilities plus owners' equity.
True
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