Chapter 7 review

For a service business, the revenue reported on an income statement is often compared to two items: total expenses and net income.

• True

• False

The net income calculated for the income statement and the net income on the work sheet can be different because of adjusting entries.

• True

• False

An amount written in parentheses on a financial statement indicates an estimate.

• True

• False

The formula for calculating the net income ratio is net income divided by total sales.

• True

• False

The area of accounting that focuses on reporting information to internal users is called managerial accounting.

• True

• False

When a business has two different sources of revenue, a separate income statement should be prepared for each kind of revenue.

• True

• False

The statement of owner's equity reports information for a period of time.

• True

• False

If a business has a net loss for the period, expenses should be reported before revenues on the income statement.

• True

• False

The current owner's capital amount reported on a statement of owner's equity is calculated as capital account balance less drawing account balance less net income.

• True

• False

The area of accounting that focuses on reporting information to external users is called managerial accounting.

• True

• False