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