Chapter 7 Review

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

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

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

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

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

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

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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.

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

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

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

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