U3, AOS 2 - Reports Flashcards
What is the primary purpose of a balance sheet?
To provide a snapshot of a company’s financial position at a specific point in time.
True or False: The income statement reflects a company’s revenues and expenses over a period of time.
True
Fill in the blank: The cash flow statement shows the cash inflows and outflows during a ________ period.
specific
What are the three main components of the cash flow statement?
Operating activities, investing activities, and financing activities.
How does the income statement help in closing the ledgers?
It summarizes revenues and expenses, allowing for the calculation of net income or loss.
What does a balance sheet consist of?
Assets, liabilities, and equity.
Multiple choice: Which statement is used to assess a company’s profitability? A) Balance Sheet B) Income Statement C) Cash Flow Statement
B) Income Statement
What is the equation represented on a balance sheet?
Assets = Liabilities + Equity
True or False: Cash flow statements are not necessary for understanding a company’s liquidity.
False
What is the purpose of reconciling the balance sheet and income statement?
To ensure that the financial statements are accurate and reflect the same financial position.
Fill in the blank: The cash flow statement is divided into three sections: operating, ________, and financing.
investing
Why is it important to close the ledgers?
To ensure that all financial transactions have been recorded and to prepare for the next accounting period.
What does an increase in liabilities on the balance sheet indicate?
It may indicate that the company is taking on more debt.
Multiple choice: Which financial statement would you use to analyze trends in revenue over multiple periods? A) Balance Sheet B) Income Statement C) Cash Flow Statement
B) Income Statement
What is the role of the cash flow statement in relation to the balance sheet?
It provides insight into how cash is generated and used, impacting the company’s financial position.
True or False: The income statement is also known as the profit and loss statement.
True
What does equity represent on the balance sheet?
The residual interest in the assets of the entity after deducting liabilities.
Fill in the blank: The cash flow statement helps investors understand a company’s ________ position.
liquidity
What financial statement is primarily used to assess a company’s operational efficiency?
Income Statement
True or False: Closing the ledgers is only necessary at the end of the fiscal year.
False
