Balance Sheet Calculation
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Questions and Answers

What is the Accounting equation that represents the financial position of a business?

  • Liabilities = Assets - Owner's Equity
  • Assets = Liabilities + Owner's Equity (correct)
  • Assets + Liabilities = Owner's Equity
  • Assets = Owner's Equity - Liabilities

    • What type of item is a vehicle classified as in a business's financial records?

  • Asset (correct)
  • Expense
  • Owner's Equity
  • Liability

    • What is the purpose of a Balance Sheet?

  • To represent the financial position of a business (correct)
  • To report profits and losses
  • To record daily transactions
  • To prepare financial statements

    • What is an example of a Liability?

    <p>GST payable</p> Signup and view all the answers

    What is Owner's Equity?

    <p>What the business owes to the owner</p> Signup and view all the answers

    What is the relationship between Assets, Liabilities, and Owner's Equity?

    <p>Assets = Liabilities + Owner's Equity</p> Signup and view all the answers

    What is the primary purpose of a Balance Sheet?

    <p>To show the relationship between assets, liabilities, and owner's equity</p> Signup and view all the answers

    Which of the following is classified as an asset?

    <p>Inventory</p> Signup and view all the answers

    What is the formula for preparing a Balance Sheet?

    <p>Total Assets = Total Liabilities + Owner's Equity</p> Signup and view all the answers

    What is the purpose of preparing a Balance Sheet as at a specific date?

    <p>To present the financial position of a business at a specific point in time</p> Signup and view all the answers

    Which of the following is classified as a liability?

    <p>Loan</p> Signup and view all the answers

    What is Owner's Equity?

    <p>The residual interest in the assets of a business after deducting liabilities</p> Signup and view all the answers

    What is the relationship between Total Assets and Total Equities?

    <p>Total Assets are equal to Total Equities</p> Signup and view all the answers

    What is the purpose of classifying assets, liabilities, and owner's equity?

    <p>To present the financial position of a business</p> Signup and view all the answers

    What is the correct order of classification in a Balance Sheet?

    <p>Assets, Liabilities, Owner's Equity</p> Signup and view all the answers

    What is the purpose of preparing a Balance Sheet at regular intervals?

    <p>To present the financial position of a business at regular intervals</p> Signup and view all the answers

    What is the primary purpose of an income statement?

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

    Which of the following is not a cash receipt for Christi's Car Clean Emporium?

    <p>Drawings</p> Signup and view all the answers

    What is the purpose of the 'Less Other expenses' section in the income statement?

    <p>To subtract the total expenses from the total revenue</p> Signup and view all the answers

    What is the correct format for an income statement?

    <p>Revenue - Expenses = Net Profit</p> Signup and view all the answers

    What is the net profit (loss) for Christi's Car Clean Emporium for January 2024?

    <p>$2,430</p> Signup and view all the answers

    Which of the following is an example of a cash payment for Christi's Car Clean Emporium?

    <p>Wages</p> Signup and view all the answers

    What is the purpose of an income statement in financial statement preparation?

    <p>To evaluate the company's financial performance over a specific period of time</p> Signup and view all the answers

    Which of the following is not a revenue item for Christi's Car Clean Emporium?

    <p>Rent</p> Signup and view all the answers

    Study Notes

    Balance Sheet

    • A Balance Sheet shows the relationship between assets, liabilities, and owner's equity
    • It is prepared as at a specific date and is a snapshot of the business's financial position at that time
    • Total Assets = Total Equities
    • Assets: what the business owns (e.g. cash, furniture, equipment)
    • Liabilities: what the business owes to external financial institutions and the owner (e.g. loan, accounts payable)
    • Owner's equity: what the business owes to the owner (e.g. capital)

    Preparing a Balance Sheet

    • Format: Assets, Liabilities, and Owner's equity are listed separately
    • Example: Singh's Studios Balance Sheet as at 31 May 2025
      • Assets: cash at bank 5000,furniture5000, furniture 5000,furniture15000, equipment $25000
      • Liabilities: loan $15000
      • Owner's equity: capital $30000

    Income Statement

    • Format: Revenue, Less Other Expenses, and Net Profit (Loss) are listed
    • Example: Christi's Car Clean Emporium Income Statement for January 2024
      • Revenue: cash fees 7430,capital7430, capital 7430,capital10000
      • Less Other Expenses: wages 2250,cleaningsupplies2250, cleaning supplies 2250,cleaningsupplies3000, drawings 700,equipment700, equipment 700,equipment9000, advertising 300,rent300, rent 300,rent2000
      • Net Profit (Loss)

    Accounting Equation

    • Assets = Liabilities + Owner's Equity
    • Assets: items that a business owns and controls (e.g. cash, inventory, accounts receivable, vehicle, furniture, equipment, premises)
    • Liabilities: items that a business owes to others and has an obligation to pay back (e.g. accounts payable, GST payable, loan, mortgage, wages owing, bank overdraft)
    • Owner's equity: what the business owes to the owner (e.g. capital, drawings)

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    Description

    Quiz about the balance sheet, showing the relationship between assets, liabilities and owner's equity. Learn how to calculate total assets and total equities.

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