Accounting Chapter 7 Review

A balance sheet can be prepared for any date or period of time.

• True

• False

A balance sheet has four sections: (1) heading; (2) assets; (3) liabilities, and (4) _______________.

• debits

• credits

• account titles

• owner's equity

For a component percentage to be useful, a business owner or manager should be familiar with what's acceptable for businesses similar to theirs.

• True

• False

On an income statement, component percentages are calculated by dividing the amount of each component by the total amount of sales.

• Total expenses

• net income

• total income

• sales

If total expenses exceed _______________, a net loss is reported on an income statement.

• net expenses

• profit

• total revenue

• net income

Managers and owners use the general ledger to make their business decisions.

• True

• False

If a business had poor available assets and many liabilities, that business is financially strong.

• True

• False

If a business's financial condition is not strong, adverse changes in the economy might cause the business to fail.

• True

• False

To prepare an income statement, account titles are obtained from the worksheet's Account Title column and account balances are obtained from the worksheet's Income Statement columns.

• True

• False

The difference between total revenue and total expenses is called 

• owner drawing

• net income or net loss

• total assets

• owner capital