About Balance Sheet

The balance sheet is a snapshot of a company's current financial situation. On its alone, it is unable to convey trends that have been unfolding over an extended period of time. Because of this, the balance sheet should be compared to the preceding period's financial statements. Balance sheets should also be compared to those of other firms in the same sector, as each industry has its own unique financing methods.

Definition of Balance Sheet

At any one point in time, a company's assets, liabilities, and shareholder equity are all shown on its balance sheet. Capital structure evaluation and rate of return calculations are based on the company's balance sheet information

In short, A balance sheet shows the assets and liabilities of a corporation, as well as the amount of money invested by shareholders. Fundamental analysis and the computation of financial ratios can be carried out using balance sheets in conjunction with other relevant financial documents.

The Balance Sheet equation

Assets = Liabilities + Shareholders’ Equity

You can see how this formula works right away. This is because a business must pay for everything it has (assets) either by borrowing money (taking on liabilities) or by receiving money from investors (issuing shareholder equity).

Significance of a Balance Sheet

Executives, investors, analysts, and regulators all evaluate the balance sheet to gauge a company's present financial health. It is commonly used in conjunction with the income statement and the cash flow statement. The assets and liabilities of a corporation may be quickly and easily seen on a balance sheet. A firm's net worth, cash on hand, and short-term assets may all be found on the balance sheet, as can information on how heavily leveraged the company is compared to its competitors.

Following are some of the multiple choice questions on the Balance Sheet with answers that will help the students in developing their knowledge.

Balance Sheet MCQ

1. What is the name given to the owner's or proprietor's account in the business?

  • Assets
  • Liability
  • Capital
  • All of the Above

2. What is another name for Statement of Financial Position?

  • Income Statement
  • Trading and Profit and Loss Account
  • Balance Sheet
  • None of the Above

3. Select the item which is not a component of a balance sheet.

  • Fixed Assets
  • Current Assets
  • Current Liabilities
  • Expenses

4. How do we calculate Total Assets?

  • Fixed Assets - Current Liabilities
  • Current Assets / Current Liabilities
  • Fixed Assets + Current Assets
  • Fixed Assets - Current Assets

5. Which of these does a balance sheet show

  • How much gross profit a business made
  • Its total revenue
  • What a business owns and owes
  • How much it paid in rent

6. On a balance sheet, if total assets are $15,000 and Total Liabilities are $10,000. Owner's Equity will equal:

  • 5,000
  • 25,000
  • 7,500I
  • All of above

7. Which of these is an asset?

  • A loan to buy a van
  • A satisfied customer
  • Any stock (Inventory) that you have
  • Reduced rent

8. Which of the following is a liability?

  • Accounts Receivable
  • Long Term Investments
  • Inventory
  • Accounts Payable

9. Which of the following is a Non current asset?

  • Furniture
  • Other Receivables
  • Trade payables
  • All the above are or can be non-current assets

10. Which of these does not appear on a balance sheet?

  • A loan to the bank
  • Machinery you own
  • Any cash in your bank
  • The breakeven point

11. What is the name given for all the resources owned by the business?

  • Assets
  • Liabilities
  • Capital
  • All of the Above

12. Which of the following is not an example of Non-current Asset.

  • Building
  • Motor Vehicle
  • Office Equipment
  • Inventory

13. Which of the following is not an example of a current asset?

  • Inventory
  • Accounts Receivable
  • Fixture and Fittings
  • Cash in Bank

14. Which of the following is a current asset?

  • Accounts Payable
  • Inventory
  • Overdraft
  • Vehicle

15. Which of the following is a current liability?

  • Accounts Receivable
  • Cash
  • Overdraft
  • Vehicle

16. Accounts Payable is listed asA = AssetsL = LiabilitySE = Stockholders Equity

  • L
  • SE
  • none of the above

17. Cash is listed asA = AssetsL = LiabilitySE = Stockholders Equity

  • L
  • SE
  • None of these

18. Land is listed asA = AssetsL = LiabilitySE = Stockholders Equity

  • L
  • SE
  • All of above

19. The Statement of Financial Position consist of three main accounts which are :

  • Assets
  • Libilities
  • Capital
  • All of the Above

20. Examples of assets include:

  • Real Property, Car, and credit cards
  • Car, Jewelry, and Checking account
  • Art collection, Jewelry, and unpaid taxes
  • Real Property, Car loan, Jewelry

21. Which accounts are needed to prepare the Statement of Financial Position?

  • Income Statement
  • Trial Balance
  • Balance Sheet
  • Both A and B

22. Examples of Liabilities include which of the following:

  • Loans, credit cards, and real property
  • Loans, mortgage, and credit cards
  • Loans, Art collection, and savings account
  • Mortgage, credit card, and real property

23. Zero net worth is defined as:

  • Assets are greater than liabilities
  • Assets are less than liabilities
  • Assets are equal to liabilities
  • None of the above

24. Accounts Receivable is a:

  • Current Asset
  • Current Liability
  • Non Current Asset
  • Non Current Liability

25. Choose the effect of the transaction:Owner withdrew $50 for his vacation

  • + 50 Cash + 50 Capital
  • -50 Cash - 50 Capital
  • -50 Bank - 50 Capital
  • None of the Above

26. Choose the effect of the transaction:Transferred cash $50 to business's bank account

  • +50 Bank - 50Cash
  • -50 Cash +50 Bank
  • +50Cash -50Bank
  • None of the Above

27. Choose the effect of the transaction:Paid the trade payable by check $50.

  • + 50 Bank - 50 Trade Payable
  • -50 Cash - 50 Trade Payable
  • -50 Bank - 50 Trade Payable
  • None of the Above

28. Choose the effect of the transaction:Withdrew cheque for business' use $50.

  • +50 Bank - 50Cash
  • -50 Cash +50 Bank
  • +50Cash -50Bank
  • None of the Above

29. Choose the effect of the transaction:Bought office supplies by cash $5.

  • +5 Office Supplies -5 Cash
  • -5 Cash +5 Supplies
  • +5 Office Supplies +5 Bank
  • None of the Above

30. Choose the effect of the transaction:Owner withdrew cheque $5 for birthday party for his son.

  • +5 Cash +5 Drawings
  • -5 Cash + Capital
  • -5 Bank - Capital
  • None of the Above

31. Choose the effect of the transaction:Purchased $50 worth of equipment on account

  • +50 Equipment - 50Cash
  • -50 Cash +50 Equipment
  • +50Equipment + 50 Trade Payable
  • None of the Above

32. Choose the effect of the transaction:Sold the furniture by cash $5.

  • +5 Cash +5 Furniture
  • -5 Bank -5 Furniture
  • -5 Bank - Capital
  • None of the Above

33. Choose the effect of the transaction: The owner started a business and invested his cash $50 and an Equipment $50 with a trade payable of $5.00

  • +50 Cash +45 Equipment + 95 Capital
  • +50Cash + 50 Equipment + 5 Trade Payable + 50 Capital
  • +50Cash + 50 Equipment + 5 Trade Payable + 100 Capital
  • None of the Above

34. Choose the effect of the transaction:Acquired a company car by cheque $50000

  • +50000 Vehicle + 50000 Bank
  • +50000 Vehicle + 50000 Cash
  • +50000 Vehicle -50000 Bank
  • None of the Above

35. Choose the effect of the transaction:Received $50 from a customer in the business' receivable.

  • +50 Cash + 50 Trade Receivable
  • +50Cash + 50 Trade Receivable
  • +50Cash -50 Trade Receivable
  • None of the Above

36. Choose the effect of the transaction:Borrowed $50 from the bank

  • +50 Cash + 50 Bank Loan
  • +50Cash + 50 Loan
  • +50Cash -50 Bank Loan
  • None of the Above

37. Choose the effect of the transaction:Incurred a bank overdraft of $5.00 in using the bank account of the business.

  • +5 Cash + 5 Bank Overdraft
  • -5 Bank -5 Bank Overdraft
  • + 5 Bank + 5 Bank Overdraft
  • None of the Above

38. Choose the effect of the transaction:Sold equipment by cash worth $1000

  • + 1000 Cash + 1000 Equipment
  • +1000 Bank + 1000 Equipment
  • + 1000 Cash + 1000 Bank
  • None of the Above

39. Choose the effect of the transaction:Purchased equipment on credit.

  • + Asset + Liability
  • +Asset - Liability
  • -Asset + Liability
  • -Asset + Liability

40. A balance sheet has four sections: 1)heading 2)assets 3) liabilities and 4)

  • credits
  • debits
  • owner's equity
  • Both A & B

41. Assets=Liabilities + Capital (True or False)

  • True
  • False

42. Buildings and Equipment is listed asA = AssetsL = LiabilitySE = Stockholders Equity

  • L
  • SE
  • None of these

43. Liabilities

  • are promises the business is planning to make
  • are debts or obligations of the business from past transactions
  • verbal promises made by the business from past times
  • are debts or obligations of the owner made in the last week

44. Retained Earnings is

  • All financing being retained
  • Past earnings not distributed to stockholders.
  • Current periods earnings not distributed
  • Everything left over after current periods dividends

45. Equity is the

  • financing provided by suppliers
  • financing provided by the bank
  • amount of financing provided by earnings alone.
  • amount of financing provided by owners of the business and earnings.

46. Non current liability are financial obligations that are due for settlement within 1 year. True or False

  • True
  • False

47. Current Assets are cash or other assets that are expected to be converted to cash within a year

  • True
  • False

48. Which of the following is considered a liability?

  • Savings Account
  • Mortgage
  • Savings bond
  • Coin Collection

49. Which of the following is considered an asset?

  • Bank Loan
  • Mortgage
  • Debit Card
  • Savings account

50. Net Worth if equal to:

  • Liabilities added to assets
  • Assets minus liabilities
  • Assets added to liabilities
  • None of these

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