Can someone help with an Accounting homework packet? please explain answers too.?

Question

True or False??

1. The accrual basis of accounting requires revenue be recorded when cash is received from customers.

2. If the adujustment for accrued taxes at the end of the perioud is inadvertently omitted, net income for the period will be overstated.

3. A work sheet is a financial statement that is an integral part of the financial statement.

4. For a corporation, the balance of the income summary account is closed to the Retained Earnings account at the end of the period.

5. Working capital is current assets less by current liabilities.

6. The vertical analysis of an income statement is performed by dividing every item on the income statement by the amount of expenses.

7. The balance in the prepaid insurance account before adjustment at the end of the year is $4,000. The amount in the journal entry required to record insurance expense will be $2,500 if the amount of unexpired insurance applicable to future periods is $1,500.

Answer 1

1. False. This is the definition of "cash basis", not accrual.
2. True. Not enough expenses means net income is too high.
3. False. A worksheet is working proof, but not included in statutory financial statements.
4. True. Net profit (less dividends) flows to retained earnings, otherwise the balance sheet doesn't balance.
5. False. Working capital is only A/R, Inventory, cash and liquid securities held for sale less accounts payable and accrued expenses. It does not include all current liabilities (e.g. current portion of notes payable is counted as debt).
6. False. Vertical analysis is looking at the financial by industry vertical (e.g. product, industry, division). It is in the footnotes and is also called segment analysis.
7. True. (Assuming no further prepaid insurance is bought or accrued).

Answer 2

OK here are some of them... due to lack of time for thumbing through my Principles of Accounting I textbook to find the right answers *shakes off cobwebs from brain*

1. False - this would be the cash basis system. Accrual recognizes revenue when it is earned.
2. True - You think you have more money because you're forgetting the accrued taxes that you owe.
3. False - Work sheets are for you benefit and are not required by the SEC for the financials.
4. sorry, gotta skip this one
5. True
6. sorry, cobwebs too thick for this one...
7. True - The prepaid insurance was an asset you credited (decreased) when the insurance came due. The insurance payment you made was an expense that was debited (increased). The math is simple: $4000-$2500 = $1500 left in the prepaid insurance asset account.

Hope this helps :-)