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Balance Sheet Basics

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Questions and Answers

Which of the following items is classified as an asset on the balance sheet?

Debtors (correct)

Capital

Ram

Creditors

What is the primary purpose of a balance sheet?

To summarize a company's operational efficiency.

To present a company's financial position at a specific point in time. (correct)

To detail a company's cash flow activities.

To report a company's income over a period of time.

Based on the provided balance sheet, what is the total value of the company's buildings and plant & machinery?

$31,500

$78,000

$60,000

$91,500 (correct)

What is the implication of negative values for 'Ram' and 'Chandra' under the liabilities section?

<p>They indicate decreases in capital or withdrawals by partners. (C)</p> Signup and view all the answers

If the 'Stock' value increased by $5,000 and the 'Creditors' value decreased by $2,000, what would be the net change in total assets and total liabilities respectively, assuming all other values remain constant?

<p>Assets +$5,000, Liabilities -$2,000 (D)</p> Signup and view all the answers

Flashcards

Balance Sheet

A document summarizing a company's financial position at a specific date.

Liabilities

Amounts a company owes to external parties, showing its obligations.

Assets

Resources owned by a company that have economic value.

Total Assets

The sum of all assets a company owns, indicating total value.

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Total Liabilities

The sum of all liabilities showing the total obligations of a company.

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Study Notes

Balance Sheet

Liabilities:
- Capital: 134677
- Ram: 22338
- Chandra: 15000
- Creditors: 65900
- Total Liabilities: 72015
Assets:
- Building: 60000
- Plant & Machinery: 31500
- Stock: 18000
- Debtors: 9215
- Cash at Bank: (1200 + 15000 + 19200) = 35300
- Total Assets: 137915
Summary:
- The balance sheet presents a snapshot of the financial position of a business by detailing its assets, liabilities, and equity at a specific point in time.
- The total Liabilities and Total Assets match, indicating the balance sheet is balanced.

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Description

This quiz covers the fundamentals of balance sheets, focusing on understanding assets, liabilities, and equity. It includes key concepts like how to balance and interpret financial statements, ensuring your knowledge aligns with accounting principles.