Chapter 7

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 Owner’s Equity section of a balance sheet may report different kinds of details about owner’s equity, depending on the need of the business.

• 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 owner’s capital amount reported on a balance sheet is calculated as capital account balance less drawing account balance plus net income.

• True

• False

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

• True

• False