Multiple Choice
The best way to determine the financial situation of a business is through:
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1. Introduction to Accounting
The Financial Statements
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Which of the following statements best defines the chart of accounts?
A
A detailed record of all transactions affecting a particular account.
B
A summary of a company's revenues and expenses over a specific period.
C
A listing of all account titles and numbers used by a company to organize its financial transactions.
D
A report showing the financial position of a company at a specific point in time.
Verified step by step guidance1
Understand the concept of a chart of accounts: A chart of accounts is a structured list of all the account titles and numbers a company uses to record its financial transactions. It serves as an organizational tool for categorizing financial data.
Analyze the options provided in the question. Each option describes a different financial accounting concept, so it is important to identify which one aligns with the definition of a chart of accounts.
Option 1: 'A detailed record of all transactions affecting a particular account' refers to a ledger, not a chart of accounts.
Option 2: 'A summary of a company's revenues and expenses over a specific period' describes an income statement, not a chart of accounts.
Option 4: 'A report showing the financial position of a company at a specific point in time' refers to a balance sheet, not a chart of accounts. Therefore, the correct answer is the one that defines the chart of accounts as 'A listing of all account titles and numbers used by a company to organize its financial transactions.'
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The Financial Statements practice set
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