Question

Accounting rules generally require that only ______ be included on the firm's financial statements?

1) assets and liabilities
2) revenues and expenses
3) cash flows
4) equity

Answer 1

Accounting standards mandate that assets and liabilities be listed on a firm's financial statements, which is represented by a balance sheet or T-account showing the relationship between the assets, liabilities, and the net worth or bank capital.

Step-by-step explanation:

Accounting rules generally require that assets and liabilities be included on the firm's financial statements.

A firm's T-account visually separates these two categories, with assets on the left and liabilities, plus net worth, on the right. A balance sheet is an accounting tool that lists both.

Assets are items of value, like cash reserves, loans made, or securities purchased. Liabilities represent what a bank owes, such as deposits held.

The net worth, or bank capital, is calculated by subtracting the total liabilities from the total assets. Ultimately, on a bank's T-account or balance sheet, assets must equal liabilities plus net worth.