Accounting Chapter 7 Review

A balance sheet has three sections: heading, assets, and liabilities.

• True

• False

The owner's capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance less net income.

• True

• False

The formula for calculating net income is: total revenue minus total expense equals net income.

• True

• False

The net income calculated for the income statement and the net income on the work sheet must be the same.

• True

• False

The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition.

• True

• False

On an income statement, double lines are ruled across both amount columns to indicate that debits equal credits

• True

• False

For a service business, the revenue reported on an income statement includes components for total expenses and net income.

• True

• False

The formula for calculating the total expenses component percentage is: total expenses divided by total sales equals total expenses component percentage.

• True

• False

The financial condition of a business refers to its financial strength.

• True

• False

The current capital to be reported on a balanace sheet is calculated as: the capital account balance plus net income equals current capital.

• True

• False