Multiple Choice
Which financial statement should Sasha use to view the company's Accounts Receivable balance as of a specific date?
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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
Which fundamental accounting concept is primarily illustrated by the balance sheet based on the information it contains?
A
The accrual basis of accounting
B
The matching principle
C
The accounting equation: \( \text{Assets} = \text{Liabilities} + \text{Equity} \)
D
The revenue recognition principle
Verified step by step guidance1
Understand that the balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time.
Recognize that the balance sheet is structured based on the accounting equation: \( \text{Assets} = \text{Liabilities} + \text{Equity} \). This equation is fundamental to financial accounting and ensures that the company's resources (assets) are balanced against claims on those resources (liabilities and equity).
Identify that the accounting equation illustrates the relationship between what the company owns (assets), what it owes (liabilities), and the residual interest of the owners (equity). This concept is central to the balance sheet.
Note that while other accounting principles like the accrual basis, matching principle, and revenue recognition principle are important, they are more directly related to the income statement and the timing of transactions rather than the structure of the balance sheet.
Conclude that the balance sheet primarily illustrates the accounting equation, as it organizes financial information into assets, liabilities, and equity to reflect the company's financial position.
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The Financial Statements practice set
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