Chapter 7 Test Review

Front

What are the three sections of the balance sheet?

Back

Assets, Liabilities, and Equity

Front

How do you calculate the capital account amount for the balance sheet?

Back

Beginning Capital (+Net Income or – Net Loss) – Drawing = Capital Account for Balance Sheet

Front

How do you calculate net income on the income statement?

Back

Subtract total expenses from total revenues

Front

What should net income on the income statement be equal to?

Back

The net income for the work sheet

Front

What is the Adequate Disclosure accounting concept?

Back

When financial statements contain all the necessary information to understand a business’s current financial condition.

Front

What do double lines ruled on an income statement tell you?

Back

Amount is correct. You are done.

Front

What are component percentages figured for? Sales, Total Expenses, Net income/ Net Loss

Back

To determine the absolute value of each component.

Front

How do you calculate component percentages?

Back

Divide Total expenses by Sales, Divide Net Income/Loss by Sales

Front

What does the term “financial condition” mean?

Back

Financial strength of a company

Front

What does a detailed Owner’s equity section on a balance sheet contain?

Back

Detailed information over how to calculate new balance sheet capital amount