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Unit Review Sheet Answers Chapter 3/Unit 4 Review Sheet 4/Preparing the Income Statement Answer or complete the following. K, C 1. (a) The name of the statement that presents the revenue, expenses, and net income (or net loss) income statement is the ________________________________ . (b) The statement that presents the assets, liabilities, and owner’s equity is the ______________ balance sheet __________________________________________________________________________ . (c) An inflow of assets from customers, earned from the sale of goods or services, is _________ revenue __________________________________________________________________________ . expenses (d) The costs of goods and services used by a company to bring in revenue are ______________ . net income (e) When revenue is greater than expenses, the difference is _____________________________ . net loss (f) When expenses are greater than revenues, the difference is ___________________________ . (g) Underline the appropriate terms in the statements that follow: Net income increases/decreases equity. Net loss increases/decreases equity. accounting period (h) The period of time covered by the financial statements is called the ____________________ . $6500 (i) (1) If the revenue is $24 500 and the expenses are $18 000, the net income is ____________ . $3500 (2) If the revenue is $24 500 and the expenses are $28 000, the net loss is _______________ . fiscal period (j) Another term for accounting period is ___________________________ . calendar year (k) The twelve-month period from January 1 to December 31 is called the _________________ . K, C 2. Give examples of each of the following. Requires that the time period used by a company to prepare time-period principle: ___________________________________________________________ financial statements be defined and be consistent from one accounting period _____________________________________________________________________________ to another. _____________________________________________________________________________ _____________________________________________________________________________ Requires that costs recorded in the expense accounts be matched matching principle: _____________________________________________________________ with the revenue generated during the same accounting period. _____________________________________________________________________________ _____________________________________________________________________________ Copyright © 2002 Pearson Education Canada Inc., Toronto, Ontario 1 Chapter 3/Unit 4 Review Sheet 4/Preparing the Income Statement (cont.) Requires that revenue be recorded when earned and accrual basis of accounting: _______________________________________________________ expenses when incurred. _____________________________________________________________________________ _____________________________________________________________________________ Requires that expenses be recorded only when they are paid for cash basis of accounting: _________________________________________________________ and revenue be recorded only when the cash is received. _____________________________________________________________________________ _____________________________________________________________________________ K, T, C, A 3. Prepare the June income statement, in acceptable form, for Gerri’s Services, using the following information. The list below contains several assets and liabilities. Remember only the revenue and expense accounts are used to prepare the income statement. Salaries Expense $ 3 000 Fees Revenue 9 975 Mortgage Payable 200 000 Other Revenue 1000 Miscellaneous Expense 80 2 Rent Expense Building Advertising Expense Telephone Expense G. Weise, Capital $ 2 000 350 000 2 000 176 197 000 Copyright © 2002 Pearson Education Canada Inc., Toronto, Ontario