Accounting Basics: Financial Statements and Business Types
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Questions and Answers

What are the primary documents used to record financial transactions in an accounting system?

Source documents, such as invoices and receipts

What is the purpose of the Trial Balance in the accounting process?

To ensure that the debit and credit entries are equal and to prepare the financial statements

What is the main difference between a sole trader and a partnership?

A sole trader is a single owner, while a partnership has two or more owners

What is the Balance Sheet equation?

<p>Assets = Capital + Liabilities</p> Signup and view all the answers

What is an example of a non-current asset?

<p>Land or building</p> Signup and view all the answers

What is the main characteristic of a current asset?

<p>It can be quickly converted into cash without losing value</p> Signup and view all the answers

What is a liability?

<p>A debt that a business has to pay off</p> Signup and view all the answers

What is the difference between a current liability and a long-term liability?

<p>A current liability is a debt that must be paid within a short period of time, while a long-term liability is a debt that can be paid over a longer period</p> Signup and view all the answers

What is the purpose of the Income Statement?

<p>To show the revenues and expenses of a business over a certain period of time</p> Signup and view all the answers

What is the Cash Flow Statement used for?

<p>To show the inflows and outflows of cash and cash equivalents over a certain period of time</p> Signup and view all the answers

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