Balance Sheet

The balance sheet is a financial statement that lists the assets and liabilities of an organization at a single point in time. It possesses items like – Property, machinery, equipment, Investments, etc. There are also liabilities like Accounts payable to vendors, Short-term loans, etc. It is a statement of the financial position of an organization at a single point in time.

In financial accounting, a balance sheet list is a snapshot of the business at one point in time. It summarizes what the company owns (its assets), what it owes (its liabilities), and its equity at that time.

Multiple Choice Questions

Q:1 Balance sheet is also known as:

1. 1. Statement Of Financial Position
   2. Statement Of Operations
   3. Statement of finance
   4. Statement of operational position

Ans. (A) Statement of financial position

Explanation:

A balance sheet is sometimes also called the statement of financial condition or financial position.

Q:2 The Statement of Financial Position gives the receipts minus the payments of an organization which is called as:

1. 1. Net Change in Receipts and Payments
   2. Net Cash Variation
   3. Net credit amount
   4. Net equity

Ans. (A) the net change in receipts and payments

Explanation:

The Net cash variation is given by the statement of the financial position of an organization, and it shows the difference between the net increase in assets and the net increase in liabilities during a given period. It is also called a cash flow statement.

Q:3 The statement of financial position gives the information about the status of an organization by:

1. 1. Giving the details of the Inventory,
   2. Long term investments
   3. Assets
   4. Income and expenses

Ans. (A) giving details of the Inventory

Explanation:

At any point in time, there is a stock of products and materials held by a business. The balance sheet will give the details about these stocks and their value. This value may be compared to the value shown in last year’s balance sheet or in another previous period to determine whether the stock has increased or decreased.

Q:4 The Statement of Financial Position gives the information about

1. 1. Assets and Liabilities
   2. Income 
   3. Expenses
   4. Credits

Ans. (B) Assets and liabilities

Explanation:

The statement of financial position gives the details about assets, their value, and the liabilities that a business owes to others at a particular point in time. This information helps to determine the net worth or equity of the business at that point in time.

Q:5 All the following are included in the Statement of Financial Position except:

1. 1. Short term loans
   2. Short term investments
   3. Long term loans
   4. Long term investments

Ans. (B) Short term loans and short term investments

Explanation:

Current assets are shown in the balance sheet and give details about cash, Inventory, accounts payable, and other current assets that a business or organization has at a particular point in time. The balance sheet will not give information about short-term loans or short-term investments.

Q:6 Assets are shown in the balance sheet as

1. 1. Debt
   2. Equity
   3. Credit
   4. Asset

Ans. (B) Equity

Explanation:

Assets will be shown in “assets = liabilities + equity.” Equities represent the contribution of shareholders to a business. Hence equity is also referred to as “net worth” or simply “worth.”

Q:7 Liabilities are shown in the balance sheet as:

1. 1. Income
   2. Expenses
   3. Credits
   4. Assets

Ans. (B) Expenses

Explanation:

Liabilities show the amount of money a business owes to its creditors. In other words, liabilities are the amount of money a business owes to its investors, suppliers, and customers.

Q:8 A company buys goods for $100 and pays $90. The amount owed to suppliers is $20. The company has bought $100 worth of goods. The amount owed to creditors is:

1. 1. Payments made to suppliers
   2. Payments made to creditors
   3. Payments made by suppliers
   4. Payment made by creditors

Ans. (A) Payments made to suppliers

Explanation:

The balance sheet details the items that the business or organization owes to its suppliers and creditors. These amounts are given at a particular point in time. If no money has changed hands, then nothing has changed since last year’s balance sheet.

Q:9 Which assets are labelled as non-physical items:

1. 1. Property
   2. Intangible Assets
   3. Equipment
   4. Plants and plots

Ans. (B) Intangible assets

Explanation:

Intangible assets are shown in the balance sheet as non-physical items like patents, trademarks, and goodwill that may not be easily converted into cash.

Q:10 The statement of financial position will give the information about

1. 1. Shares of the company’s capital stock
   2. Shares of the company’s stock
   3. Shares of the market’s stock
   4. Shares of stocks

Ans. (B) Shares of the company’s capital stock

Explanation: 

The balance sheet gives details about a business or organization’s capital structure, also known as its long-term liabilities and equity.

Q.11: The amount of money that a company owes to its creditors is called:

1. 1. Liabilities
   2. Current Liabilities
   3. Assets
   4. Credit ratings

Ans. A), Liabilities

Explanation: Liabilities are the debts or claims an organization owes to creditors or others. For example, if a business borrows money from a bank and then fails to repay it when it is due, this amount will be shown as one of the liabilities on its balance sheet.

Q.12:  A company has Inventory worth $100 and some accounts payable amounting to $60. In this case, the amount of current liabilities is

1. 1. $60
   2. $100
   3. $40
   4. $160

Ans. B), $100

Explanation: A company’s current liabilities include all short-term or current monetary obligations or debts that an organization owes to others.

Q:13 Which one of the following is included in the income statement?

1. 1. Income
   2. Expenses
   3. assets
   4. Investment

Ans. (B) Expenses

Explanation:

An income statement is also known as a Profit and Loss Account or P&L statement. It shows the operating income and expenses against a company’s performance for a particular period of time. The other financial statements listed are Balance Sheet, Cash Flow Statement, Statement of changes in stockholders’ equity, and Statement of Retained Earnings.

Q:14 The statement of financial position gives information about:

1. 1. Assets and liabilities
   2. Income 
   3. credits
   4. Expenses

Ans. (A) Assets and liabilities

Explanation:

The statement of financial position gives the details about assets, their value, and the liabilities that a business owes to others at a particular point in time. This information helps to determine the net worth or equity of the business at that point in time.

Q:15 The balance sheet of a company will show short term loans and short term investments as:

1. 1. Current assets
   2. Long term assets
   3. Short term assets
   4. Liabilities

Ans. (B) Long-term assets

Explanation:

Short-term investments or loans are not included in current assets, and they can be found under long-term assets in a company’s balance sheet. Current Assets are shown in the balance sheet and give details about cash, inventory, accounts payable, and other current assets that a business or organization has at a particular point in time.

Q:16 The statement of financial position shows the details about the current liabilities. For example, what do you think the statement would show for a company that buys goods for $100 and pays $90?

1. 1. $10
   2. $20
   3. $5
   4. $15

Ans. (B) $20

Explanation: 

Current liabilities represent short-term monetary obligations or debts that an organization owes to others at a particular point in time. 

Q:17 A company’s current liabilities include all short-term or current monetary obligations or debts that the organization owes to others as 

1. 1. short-term investments
   2. accounts payable
   3. Liabilities
   4. Credits

Ans. (B) Accounts payable

Explanation:

Accounts Payable, if any, are part of current liabilities that indicate all money that the company owes to suppliers, vendors, and others within one year. Another name for this is payables.

Q:18 The balance sheet of a company will show long term loans and long term investments as:

1. 1. Current assets
   2. Long-term assets
   3. Income
   4. Expenses

Ans. (A) Current assets

Explanation:

A company’s balance sheet gives details about its liquidity or solvency, and the solvency ratios help measure the impact of current and noncurrent assets, current liabilities, and stockholders’ equity in terms of business operations.

Q:19 The statement of operations gives details about:

1. 1. Income
   2. Expenses
   3. Salary
   4. Credits

Ans. (B) Expenses

Explanation:

An income statement is also known as a Profit and Loss Account or P&L statement, and it shows the operating income and expenses against the performance of a company for a particular period of time. The other financial statements listed are the Balance Sheet, Cash Flow Statement, Statement of changes in stockholders’ equity, and statement of retained earnings.

Q:20 The statement of financial position gives information about:

1. 1. Assets and liabilities
   2. Income and expenses
   3. Credits
   4. Liquidity

Ans. (B) Assets and liabilities

Explanation:

The statement of financial position gives the details about assets, their value, and the liabilities that a business owes to others at a particular point in time. This information helps to determine the net worth or equity of the business at that point in time.

Q:21 An account that shows the amount of money a company has gained or lost is:

1. 1. Interest expense
   2. Earnings before interest and tax
   3. Bank charges
   4. Interest income

Ans. (B) Earnings before interest and tax

Explanation:

Interest expense is an account that shows the revenue gained by the company from borrowing. It is also known as bank charges and interest income.

Q:22 Which of the following are not included in the statement of financial position?

1. 1. Short-term or current financial obligations
   2. Current assets
   3. Financial position
   4. Assets

Ans. (A) Short-term or current financial obligations

Explanation: 

The balance sheet is also referred to as the statement of financial position or the statement of financial condition. It gives details about assets, their value, and the liabilities that a business owes to others at a particular point in time.