1. Chapter 7
Financial Statements

2. 19. Income Statement
Component percentage – the percentage relationship between one financial statement item and the total that includes that item

3. Accounting Concept:
Adequate Disclosure – accounting concept when financial statements contain all information necessary to understand a business’s financial condition
Going Concern – accounting concept when financial statements are prepared with the expectation that a business will remain in operation indefinitely

4. HEADING OF AN INCOME STATEMENT
page 182 1 2 3
1. Center the name of the company on the first line.
2. Center the name of the report on the second line.
3. Center the date of the report on the third line.
LESSON 7-1

5. SECTIONS OF AN INCOME STATEMENT
page 183 7
Single line 1
Revenue 2
Account title 3
Revenue amount 4
Expenses 5
Account titles 6
Expense amount 8
Total expenses 9
Total of expenses 11
Single line 13
Record net income 12
Net Income 14
Double lines 10
Calculate net income
LESSON 7-1

6. COMPONENT PERCENTAGE ANALYSIS OF AN INCOME STATEMENT
page 184
LESSON 7-1

7. INCOME STATEMENT WITH TWO SOURCES OF REVENUE AND A NET LOSS
page 185 5
Total Revenue 1
Revenue 2
Account titles 3
Revenue amounts 4
Total of revenue 6
Net Loss 7
Record Net Loss
LESSON 7-1

8. 20. Balance Sheet
Stakeholder – any persons or groups who will be affected by an action

9. HEADING OF A BALANCE SHEET
page 187 1 2 3
1. Center the name of the company on the first line.
2. Center the name of the report on the second line.
3. Center the date of the report on the third line.
LESSON 7-2

10. ASSETS AND LIABILITIES SECTIONS OF A BALANCE SHEET
page 188 6
Liability amounts 5
Account titles 1
Assets 4
Liabilities 2
Account titles 3
Asset amounts
Single line 7
Total of liabilities 9
Total Liabilities 8
LESSON 7-2

11. OWNER’S EQUITY SECTION OF A BALANCE SHEET
page 189 1
Owner’s Equity 4
Single line 2
Account title 3
Capital amount - calculated 6
Total of assets 8
Total of Liabilities and Owner’s Equity 5
Total Assets 9
Compare totals 7
Total Liab. and Owner’s Eq. 10
Double lines
LESSON 7-2

12. OWNER’S EQUITY REPORTED IN DETAIL ON A BALANCE SHEET
page 190 3
Net Income 8
Current capital amount 1
Beginning capital 6
Difference 2
Beginning capital amount 4
Drawing 5
Single line
Ending capital 7 9
Total Liabilities and Owner’s Equity
LESSON 7-2