Question

Eliza has just opened a new business near campus that is a combination of a laundromat, a nail salon, and a tanning studio. There is an accounting firm located just down the street and Eliza is paying them to do all of her accounting. At the end of the first quarter (three months of business), Eliza has several questions about how things are going. If she wants to understand how much debt the business has right now, then she should look at the ________ that her accountant has prepared.

a. the income statement
b. the statement of owner’s equity
c. the balance sheet

Answer 1

To understand her business's current debt, Eliza should examine the balance sheet prepared by her accountant, which lists all liabilities and assets.

Step-by-step explanation:

If Eliza wants to understand how much debt her new business has at the end of the first quarter, she should look at the balance sheet that her accountant has prepared. The balance sheet is an accounting tool that lists both assets and liabilities. A T-account on the balance sheet has a two-column format: the left side lists the assets and the right side lists the liabilities and net worth, which includes the total assets minus the total liabilities, reflecting the financial health of the business. This accounting statement will show her the debts or liabilities her business owes, which could include loans, accounts payable, and any other financial obligations.

Answer 2

The correct answer is the statement of cash flows

Step-by-step explanation:

Note: The correct option is missing in the question. So, providing the answer.

The statement of cash flows is the statement which states the cash inflows and the cash outflows of the business or the firm during the year or a period of time. It is used for determining or evaluated the amount of cash the business has in order to cover the debt at the end of the period.

So, Eliza wants to see that how much debt she has, she will look at the the statement of cash flows, which is prepared by the accountant.