Concept explainers
When calculating a ratio with numbers from the balance sheet and income statement, why must you use the balance sheets from the beginning and end of the period covered by the income statement?
Explain the reason for use of the balance sheet from the beginning and end of the period covered by the income statement while computing a ratio with the numbers from the balance sheet and income statement.
Explanation of Solution
It is compulsory for the reason that the income statement depicts all transactions between the beginning and end of the given period, while the balance sheet depicts the split points in time at each end of the period capped by the income statement.
Want to see more full solutions like this?
Chapter 6 Solutions
Construction Accounting And Financial Management (4th Edition)
Additional Business Textbook Solutions
Intermediate Accounting
Horngren's Accounting (11th Edition)
Financial Accounting, Student Value Edition (4th Edition)
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Intermediate Accounting (2nd Edition)
Principles of Accounting Volume 2
- What is the effect on the current period income statement and the balance sheet when inventories are written down using the lower of cost or market method? What is the effect on future period income statements and balance sheets?arrow_forwardIncome statement items Based on the data presented in Exercise 1-16, identify those items that would appear on the income statement.arrow_forwardwhen putting together an income statement do the revenues and expenses have to put in order from highter amount to lowest?arrow_forward
- choose: When a balance sheet amount is related to an income statement amount in comparing a ratio a. The ratio losses its historical perspective because at the beginning of the year amount is combined with an end of the year amount. b. The income statement amount should be converted to an average for the year. c. Comparisons should be converted to market value d. The balance sheet amount should be converted to an average for the year.arrow_forwardWhen should an average amount be used for the numerator or denominator? When the denominator is a balance sheet item or items. When a ratio consists of an income statement item and a balance sheet item. When the numerator is a balance sheet item or items. When the numerator is an income statement item or items.arrow_forwardWhat is the difference between the time periods listed on an income statementand on a balance sheet?arrow_forward
- can you help on the preperation of excel The income statement. The statement of retained earnings. The balance sheet. Ratios that can be calculated from the data presented.arrow_forwardCalculate Ratios. For 201B and 201A income statements and balance sheets, what percentage is each category (rounded to one decimal place)?arrow_forwardWhat is the relationship between net income on the income statement and the equity section on the balance sheet?arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,College Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub