Multiple Choice
Which of the following is NOT one of the four basic financial statements?
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1. Introduction to Accounting
The Financial Statements
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Which of the following financial statements consists of columns and rows of numerical or text data?
A
Footnotes to the Financial Statements
B
Auditor's Report
C
Balance Sheet
D
Management Discussion and Analysis
Verified step by step guidance1
Understand the purpose of each financial statement or report mentioned in the problem. For example, the Balance Sheet is a formal financial statement that presents numerical data in rows and columns, showing the company's assets, liabilities, and equity at a specific point in time.
Review the structure of the Balance Sheet. It is organized into three main sections: Assets, Liabilities, and Equity. Each section contains rows of specific accounts and their corresponding numerical values.
Compare the Balance Sheet to other items listed in the problem. Footnotes to the Financial Statements provide additional explanatory text but do not consist of rows and columns of numerical data. Similarly, the Auditor's Report and Management Discussion and Analysis are narrative documents without tabular numerical data.
Recognize that the Balance Sheet is the correct answer because it is the only financial statement among the options that uses a tabular format with rows and columns to present numerical data.
Conclude that understanding the format and purpose of each financial statement is essential for identifying the correct answer in similar problems.
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