Question

1.The fundamental rule of the balance sheet is assets equals liabilities plus owners’ equity.

True

False

2.Owners’ equity are the things a business owns, such as cash, inventory, and money owed from customers.

True

False

3.The cumulative profits of the business since inception are known as retained earnings.

True

False

4.Assets and liabilities on a balance sheet are always presented at current market value.

True

False

5.The main sections of a balance sheet are:

Assets, liabilities, and net profits

Assets, liabilities, and owners’ equity

Assets, liabilities, and cumulative cash contributions

Operating activity, financing activity, and asset activity

6.The balance sheet shows:

How much money a business made last month

Where the money comes from and goes to

What a business owns and what it owes

The current market value of a business

7.Current assets include:

Prepaid expenses

Work in process

Credit union deposits

All of the above

8.The net plant, property and equipment as presented on a balance sheet reflects:

The current value of the plant property and equipment owned by the business

The acquisition cost the plant, property and equipment owned by the business

The current value of the plant, property and equipment less accumulated depreciation

The historical cost of the plant, property and equipment less accumulated depreciation

9.The liabilities section of the balance sheet includes:

Net losses and retained earnings

Operating expenses and payments due

Current liabilities and long-term liabilities

Current assets and current liabilities

10.Retained earnings are:

The amount of profits retained as cash

The amount of profits retained as cash and reinvested in the business

The cumulative profits of the business since inception

The cumulative profits of the business since inception not paid to the owners

Answer 1

Part 1) True

As per Accounting Equation,

Assets = Liabilities + Owner's Equity

Part 2) False

Owner's Equity represents the share of owner which is left from assets after deducting liabilities from same.

Part 3)True

Each year net income derived from Income statement of company is transferred to Retained earnings. Hence Retained Earnings consists of accumulated profits since inception.

Part 4) False

Assets and Liabilities on a balance sheet are represented at historical values.

Part 5)OPTION B

The main sections of balance sheet are Assets, Liabilities and Owners Equity.

Part 6)OPTION C-----What a business owns and what it owes

The balance sheet shows what a business owns(assets) and what it owes(liabilities).

Part 7)OPTION D----- all of the above

Current assets are those assets which are expected to be converted into cash within a year.

Part 8)OPTION D

Historical Cost of Plant, property and equipment less accumulated depreciation.

Part 9)OPTION C------ Current Liabilities and Long term liabilities

Liabilities section of balance sheet includes current liabilities and long term liabilities

Part 10)OPTION C

Retained earnings are cumulative profits of business since inception