Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Classified Balance Sheet Components

Financial Accounting

2. Transaction Analysis

Classified Balance Sheet Components

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Multiple Choice

Which of the following best describes a 'common base year balance sheet' in the context of classified balance sheet components?

A balance sheet that only includes current assets and current liabilities.

A balance sheet in which each item is expressed as a percentage of the total assets for a selected base year.

A balance sheet prepared using the cash basis of accounting.

A balance sheet that lists assets and liabilities in order of liquidity.

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Verified step by step guidance

Understand the concept of a 'common base year balance sheet': This type of balance sheet is used in financial analysis to compare financial data over time. Each item on the balance sheet is expressed as a percentage of the total assets for a selected base year, allowing for trend analysis and comparison across periods.

Eliminate the incorrect options: Review each option provided in the question and determine if it aligns with the definition of a 'common base year balance sheet'.

Option 1: 'A balance sheet that only includes current assets and current liabilities' - This is incorrect because a common base year balance sheet includes all components of the balance sheet, not just current assets and liabilities.

Option 3: 'A balance sheet prepared using the cash basis of accounting' - This is incorrect because the cash basis of accounting refers to a method of recording transactions, not the format or analysis of a balance sheet.

Option 4: 'A balance sheet that lists assets and liabilities in order of liquidity' - This is incorrect because listing items in order of liquidity is a characteristic of a classified balance sheet, not a common base year balance sheet. The correct answer is the option that describes expressing each item as a percentage of total assets for a base year.