Multiple Choice
Given the following financial information:\begin{align*}\text{Assets} &= \$120,000 \\\text{Liabilities} &= \$45,000\end{align*}What is the amount of owner's equity that should be reported on the balance sheet?
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1. Introduction to Accounting
The Financial Statements
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which financial statement provides information as of a specific point in time?
A
Statement of Cash Flows
B
Statement of Retained Earnings
C
Income Statement
D
Balance Sheet
Verified step by step guidance1
Understand the purpose of each financial statement: The Balance Sheet provides a snapshot of a company's financial position at a specific point in time, while the other statements (e.g., Income Statement, Statement of Cash Flows, and Statement of Retained Earnings) cover a period of time.
Recall the structure of the Balance Sheet: It includes three main components—Assets, Liabilities, and Equity—showing the accounting equation: Assets = Liabilities + Equity.
Recognize the time frame: The Balance Sheet is unique because it reports the financial position as of a specific date, such as 'December 31, 2023,' rather than over a period.
Differentiate from other statements: For example, the Income Statement reports revenues and expenses over a period (e.g., a month or year), while the Statement of Cash Flows tracks cash inflows and outflows over a period.
Conclude that the Balance Sheet is the correct answer because it provides information as of a specific point in time, unlike the other financial statements that summarize activities over a period.
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