A balance sheet is a financial statement that records a firm’s liabilities, assets, and shareholders’ equity at a particular time. It is a basis for evaluating rates of return and its capital structure.
The financial statements such as a statement of cash flows and the income statement along with balance sheet are used to prepare and analyse the financial status of a company.
Given below are important MCQs on Balance Sheet to analyse your understanding of the topic. The answers are also given for your reference.
Balance Sheet MCQs
1. On balance sheet, accruals, notes payable, and account payable are listed under which category?
A) Current Liabilities
B) Accumulated Liabilities
C) Noncurrent Liabilities
D) Accrued Liabilities
Answer: A
2. Inventories, cash and equivalents, and accounts receivables are listed as
A) Earnings on Income Statement
B) Payments on Income Statement
C) Assets on the Balance Sheet
D) Liabilities on the Balance Sheet
Answer: C
3. Which of the following is not a current asset
A) Supplies
B) Land
C) Accounts Receivable
D) Prepaid Insurance
Answer: B
4. In the situation of bankruptcy, a stock which is recorded above common stock and below debt account is
A) Preferred Stock
B) Debt Liabilities
C) Common Liabilities
D) Hybrid Stock
Answer: A
5. A firm buys products but does not pay to suppliers instantly. This is recorded as
A) Account Receivable
B) Account Payable
C) Accumulated Liabilities
D) Current Liabilities
Answer: B
6. In a balance sheet, the total of common stock and retained earnings are denoted as
A) Common Equity
B) Due Equity
C) Preferred Equity
D) Common Perpetuity
Answer: A
7. The process of recording inventory that gives a lower cost of a commodity sold in an income statement is denoted as
A) First Out Receivable
B) Last in First Out
C) Last Out Receivable
D) First in First Out
Answer: D
8. Financial securities which can be changed into cash to their book value price are categorised as
A) Short-term Investments
B) Inventories
C) Long-term Investments
D) Cash Equivalents
Answer: D
9. Earnings that have a cumulative amount and are not paid to the stockholder as a dividend is known as
A) Common Earnings
B) Preferred Earnings
C) Non-paid Earnings
D) Retained Earnings
Answer: D
10. Information that is used by investors for expecting future earnings is recorded in
A) Annual Report
B) Five Years Report
C) Exchange Report
D) Stock Report
Answer: A
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FAQs
A balance sheet is a financial statement that contains details of a company's assets or liabilities at a specific point in time. It is one of the three core financial statements (income statement and cash flow statement being the other two) used for evaluating the performance of a business.
What questions can a balance sheet help answer? ›
The balance sheet can help users answer questions such as whether the company has a positive net worth, whether it has enough cash and short-term assets to cover its obligations, and whether the company is highly indebted relative to its peers.
What does the balance sheet tell you Mcq? ›
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.
What can be the most appropriate role of the income statement from the following options: mcq? ›
The correct option is C. It identifies an organization's operating effectiveness and net income. The income statement is used by the analysts to determine whether the business entity is operating efficiently or not. It is assessed by considering the statistics of expenses and revenue.
How to solve balance sheet? ›
Add Total Liabilities to Total Shareholders' Equity and Compare to Assets. To ensure the balance sheet is balanced, it will be necessary to compare total assets against total liabilities plus equity. To do this, you'll need to add liabilities and shareholders' equity together.
How to complete a balance sheet? ›
Follow these steps:
- Step 1: Pick the balance sheet date. ...
- Step 2: List all of your assets. ...
- Step 3: Add up all of your assets. ...
- Step 4: Determine current liabilities. ...
- Step 5: Calculate long-term liabilities. ...
- Step 6: Add up liabilities. ...
- Step 7: Calculate owner's equity. ...
- Step 8: Add up liabilities and owners' equity.
Your balance sheet gives you a summary of your company's financial position at a point in time and provides a clear picture of what you own and what you owe.
What is the most important thing in balance sheet? ›
Many experts believe that the most important areas on a balance sheet are cash, accounts receivable, short-term investments, property, plant, equipment, and other major liabilities.
How to read balance sheet pdf? ›
On the Balance Sheet, Assets are always listed first, followed by Liabilities, and then Shareholder's Equity. In Some financial statements, the Balance Sheet is organized with the Assets on the left side of the page and the Liabilities and Shareholder's Equity on the right side of the page.
What is triple bottom line mcq? ›
Triple Bottom Line (TBL) is an accounting framework that evaluates the performance of an organization in three dimensions: social, environmental, and economic. The TBL framework is used to measure the financial, social, and environmental performance of a company over time.
A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time.It shows the company's assets, liabilities, and shareholders' equity.
What is a balance sheet pdf? ›
http://www.nonprofitfinancefund.org/sites/default/files/22-1_christopher_why-do-balance-sheets-matter1.pdf. Definition: A statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period.
What is the basic income statement? ›
An income statement is one of the three major financial statements, along with the balance sheet and the cash flow statement, that report a company's financial performance over a specific accounting period. The income statement focuses on the revenue, expenses, gains, and losses of a company during a particular period.
Which of the following is not recorded in the balance sheet MCQ? ›
Rent expenses does not appear in Balance sheet.
What is profit equal to in Mcq? ›
Profit = Total Income - Total Expenses.
What is the balance sheet explained? ›
A balance sheet is a financial statement used in accounting. It includes three main ingredients: your assets, your liabilities and the shareholders' equity. In other words, it records what you own (assets) and who owns it – either a third party like a bank (liability) or the company and its shareholders (equity).
What is balance sheet explaining? ›
The balance sheet includes information about a company's assets and liabilities, and the shareholders' equity that results. These things might include short-term assets, such as cash and accounts receivable, inventories, or long-term assets such as property, plant, and equipment (PP&E).
What is a balance sheet quizlet? ›
Balance Sheet. A statement of a company's assets, liabilities, and owner's equity on a certain date. Capital. Owner's equity or net worth. Current Ratio.
What are in a balance sheet? ›
A balance sheet is comprised of two columns. The column on the left lists the assets of the company. The column on the right lists the liabilities and the owners' equity. The total of liabilities and the owners' equity equals the assets.
