Component percentages indicate the relative size of each item included in a total.Which of the following statements is true?
A)Income statement items are expressed as a percentage of net income,while balance sheet items are expressed as a percentage of total assets.
B)Income statement items are expressed as a percentage of net sales,while balance sheet items are expressed as a percentage of total assets.
C)Income statement items are expressed as a percentage of net income,while balance sheet items are expressed as a percentage of net assets.
D)Both income statement and balance sheet items are expressed as a percentage of net assets.

Question

Quizplus · Accepted Answer

Component percentages are typically used to show the relative size of each item on financial statements. On the income statement, items are expressed as a percentage of net sales (also known as revenue or operating revenue), while on the balance sheet, items are expressed as a percentage of total assets. Option A is incorrect because income statement items are not expressed as a percentage of net income, but rather as a percentage of net sales. Option C is incorrect because balance sheet items are not typically expressed as a percentage of net assets, but rather as a percentage of total assets. Option D is incorrect because income statement items are not typically expressed as a percentage of net assets, but rather as a percentage of net sales.

Component Percentages Indicate the Relative Size of Each Item Included