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

What is the most commonly used base item for preparing a common size balance sheet?

Total liabilities

Total revenues

Net income

Total assets

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Verified step by step guidance

Understand the concept of a common size balance sheet: A common size balance sheet expresses each item as a percentage of a base item, allowing for easier comparison across companies or periods.

Identify the base item used for the common size balance sheet: The base item should represent the total resources or financial position of the company. In this case, it is 'Total assets.'

Explain why 'Total assets' is used: Total assets provide a comprehensive view of the company's financial position, as they include all resources owned by the company, both current and non-current.

Clarify why other options are not correct: 'Total liabilities' only represent obligations, not the full financial picture. 'Total revenues' and 'Net income' are related to the income statement, not the balance sheet.

Conclude that 'Total assets' is the correct base item for preparing a common size balance sheet, as it allows each balance sheet item to be expressed as a percentage of the company's total resources.