Question

Second Level: Bridge between Levels 1 & 3. Elements of financial statements are defined so users have a common understanding of the main items presented on the financial statements:

A. Assets, liabilities, equity, income, expenses
B. Cash, accounts receivable, inventory, accounts payable, revenues
C. Tangible assets, intangible assets, long-term liabilities, short-term liabilities, retained earnings
D. Investments, fixed assets, variable costs, operating expenses, dividends

Answer 1

A balance sheet lists assets, liabilities, and equity. Examples of assets include cash and inventory, while liabilities include accounts payable and long-term liabilities.

Step-by-step explanation:

A balance sheet is an accounting tool that lists assets and liabilities. An asset is something of value that you own and can use to produce something, such as cash, a home, or inventory. Liabilities are debts or things you owe, like a mortgage or accounts payable. The net worth, which is the asset value minus the liabilities, is included on the liabilities side of the balance sheet to balance it out.

Examples of assets in a balance sheet include cash, accounts receivable, inventory, and investments. Examples of liabilities include accounts payable, long-term liabilities, and short-term liabilities. Equity is also listed on the balance sheet, which represents the owner's or shareholders' interest in the company.