Accounting Fundamentals Quiz

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.