Future Business Leaders of America (FBLA) Accounting Practice Test

What term refers to the percentage relationship between one financial statement item and the total that includes that item?

1. Fiscal Period

2. Work Sheet

3. Trial Balance

4. Percentage Analysis

The correct answer is: Percentage Analysis

The term that describes the percentage relationship between one financial statement item and the total that includes that item is known as Percentage Analysis. This technique is particularly useful in financial reporting and analysis as it allows for the evaluation of various components of financial statements relative to a whole. By converting individual item amounts into percentages, stakeholders can assess the significance of each line item in relation to the total figure. For instance, if a company’s sales figure represents 20% of its total revenue, this percentage analysis can help in understanding the contribution of sales to the overall financial performance. It is a critical tool for trend analysis, as it enables comparisons both over time and with other companies or industry averages. In contrast, other terms like Fiscal Period, Work Sheet, and Trial Balance refer to different concepts in accounting. A fiscal period pertains to the designated time frame for which financial statements are prepared; a work sheet is a tool used in the accounting process to organize data before finalizing the financial statements; and a trial balance is a statement that lists all the balances of the ledger accounts to ensure that they are equal, but does not involve percentage calculations. Thus, Percentage Analysis is specifically designed to convey the relationship of different financial components through percentages, making it the correct choice for this