For each statement you answer, insert "T" or "F" in the appropriate space on the separate answer sheet. 1. 2. 3. 4. 5. 6. 7. 8. A balance sheet is also known as statement of financial position. A chart of accounts is a listing of all general ledger accounts showing the debit or credit balance of each account and also showing that total debits equal total credits. On a balance sheet, a current asset is defined generally as one that is expected to be used up or turned into cash within twenty four months of the balance sheet date. General ledger accounts are referred to as temporary accounts and income statement accounts are referred to as permanent accounts. The owner of a sole proprietorship will be personally liable for all debts of the sole proprietorship. The purpose of a statement of cash flows is to report and explain net income over a period of time. Revenue is reported when a company fulfills its promise to transfer control of a good or service to a customer, regardless of when the company is actually paid by the customer. The amount by which a corporation's stockholders' equity is increased as a result of profitable operations is referred to as net income. Managerial accounting reports are designed to inform external users (banks, creditors, the IRS, etc.) about the company's operational activities. A company using a cash basis method of accounting will not record revenue until cash is actually received and will not record expense until cash is actually spent. A corporation paying a dividend to its shareholders would report it as an expense on its income statement for the year. A balance sheet reports activity (net income for example) over a period of time. The main goal of GAAP is to ensure that American corporation file accurate federal income tax returns each calendar year, A collection of records that summarizes, for each account, the effects of transactions and the balance (debit or credit) of each account is called the general journal. A "T account" is a simplified version of a general ledger account used for summarizing transaction effects and determining the balance for the account By examining the balances of asset and liability accounts presented on a company's balance sheet, an analysist can determine the actual market value of the company. A company's trial balance that is "in balance" is an indication that no errors exist in the company's general ledger. 9. 10. 11. 12. 13. 14. 15. 16. 17