Multiple Choice
Why should the income statement be prepared before the other financial statements?
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1. Introduction to Accounting
The Financial Statements
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
In financial accounting, the balance sheet lists:
A
Changes in shareholders’ equity (including dividends and retained earnings) for a period of time
B
Cash receipts and cash payments from operating, investing, and financing activities for a period of time
C
Assets, liabilities, and shareholders’ equity at a specific date
D
Revenues, expenses, and net income for a period of time
Verified step by step guidance1
Step 1: Understand the purpose of a balance sheet. The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time.
Step 2: Identify the main components of a balance sheet. These are assets, liabilities, and shareholders' equity, which together represent what the company owns, owes, and the residual interest of the owners.
Step 3: Differentiate the balance sheet from other financial statements. For example, the income statement shows revenues, expenses, and net income over a period, while the cash flow statement shows cash inflows and outflows over a period.
Step 4: Recognize that changes in shareholders' equity (including dividends and retained earnings) are typically shown in the statement of changes in equity, not directly on the balance sheet.
Step 5: Conclude that the balance sheet lists assets, liabilities, and shareholders' equity at a specific date, reflecting the company's financial position at that moment.
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