Preparing an Income Statement and Balance Sheet

Acceptable

A component percentage that is considered useful based on industry standards

Balance Sheet

A financial statement that reports the financial condition of a business on a specific date by showing its assets, liabilities, and owner's equity

Income Statement

A financial statement that reports the financial progress of a business over a specific period by showing the revenue earned and expenses incurred

Stakeholders

Individuals or groups with an interest in a business, such as owners, investors, employees, and creditors

Financial Condition

Refers to the financial strength and stability of a business

Expense

The amounts a business pays to operate and earn revenue

Component Percentage Analysis

The analysis of component percentages on an income statement to evaluate the financial performance of a business

Revenue

The earnings of a business from its business activities

Assets

The elements on the left side of the accounting equation and balance sheet, representing what a business owns

Liabilities

The elements on the right side of the accounting equation and balance sheet, representing what a business owes

Net Income or Net Loss

The final section of an income statement that shows the difference between revenue and expenses, indicating whether the business made a profit or incurred a loss

Heading

The first section of an income statement that includes the name of the company, the name of the report, and the date of the report

Income Statement Information on a Work Sheet

The information on a work sheet that is used to prepare the income statement

Owner's Equity

The owner's investment in the business, representing the residual interest in the assets after deducting liabilities

Net Income Component Percentage

The percentage of net income to total sales, used for component percentage analysis

Total Expenses Component Percentage

The percentage of total expenses to total sales, used for component percentage analysis

Component Percentage

The percentage relationship between a financial statement item and the total, used for analysis

Obtain Information

The process of gathering information for the assets and liabilities sections of a balance sheet

Owner's Equity Section

The section of a balance sheet that reports the owner's investment and any changes in it