Fundamentals & Insurance | Lesson 6: Financial Statements & Analysis

Question 1

When preparing a client’s statement of financial position, which of the following is true?

a) A reserve liability account for taxes owed on the sale of assets should be listed.
b) Assets with more volatility should be listed first in the investment assets section.
c) All expenditures should be categorized as fixed or variable.
d) Anticipated liabilities, such as a potential car purchase in 10 years, should be reported and recorded at their net present value.

Answer 1

Answer: A
A reserve liability account for taxes owed on the sales of assets should be listed.
B - assets should be listed as liquid to least liquid.
C- expenditures would be on the cash flow statement.
D - statement of financial position is a snapshot in time. A Pro-forma statement would account for future assets/debt.