Question

Read the below scenario. Choose the type of financial statement that would best describe what is occurring financially.

You want to buy a home. The home is worth $100,000 and you have $25,000 in the bank. You go to the bank to get a $75,000 loan. The bank agrees and you receive $75,000 from the bank to buy the home.

What financial statement would best describe this scenario?

*Hint:

- What is your equity (how much you had in the bank)?

- What are your liabilities (these are obligations you have to pay back)?

- Once you purchase the home, can you consider that an asset?

a. Income Statement

b. balance sheet

c. statement of cash flows

d. Changes in Net Assets

Answer 1

Answer : b. balance sheet

as

In Balance sheet we will show

Equity = $25000 our own amount incurred for purchase of asset

Liabilities = $75000 payable to bank

Assets = Home of $100000

These all items will be presented in the balance sheet

so answer is b. Balance sheet