Questions and Answers
What does a balance sheet show?
Which of the following is an example of an asset?
What is an example of a liability?
Why are financial statements important?
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Which of the following would you find in the income statement?
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What does a company use to pay off its debts?
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Which is considered a current asset?
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What is the main role of a financial statement?
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What is the purpose of an annual report?
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Which of the following is found in the statement of financial position?
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Study Notes
Financial Statements
- A balance sheet shows a company's assets and liabilities.
- Assets are resources owned or controlled by a company, such as cash or inventory.
- Liabilities are debts or obligations that a company owes to others.
Identifying Assets and Liabilities
- Examples of assets include:
- Cash
- Inventory
- Equipment
- Patents
- Examples of liabilities include:
- Loans
- Accounts payable
- Mortgages
Importance of Financial Statements
- Financial statements are important because they help understand a company's financial health.
- They provide a snapshot of a company's financial position at a specific point in time.
Income Statement
- An income statement shows a company's revenues and expenses over a specific period of time.
- It includes:
- Total sales revenue
- Expenses
- Net income
Using Assets to Pay Off Debts
- A company uses its assets to pay off its debts.
Current Assets
- Current assets are assets that can be converted into cash within a year.
- Examples of current assets include:
- Cash
- Accounts receivable
- Inventory
Financial Statement Purpose
- The main role of a financial statement is to report a company's financial performance.
Annual Report
- An annual report reviews a company's yearly performance.
- It provides a comprehensive overview of a company's financial position and performance over the past year.
Statement of Financial Position
- The statement of financial position, also known as the balance sheet, shows a company's assets and liabilities.
- It provides a snapshot of a company's financial position at a specific point in time.
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Description
Test your knowledge of basic accounting concepts, including balance sheets, assets, liabilities, and financial statements.
