ITPEC FE Morning April 2022 Question 79
In financial statements, which of the following shows the company’s assets, liabilities, and net assets at a certain point in time and indicates the company’s financial situation?
Explanation
Balance sheet — it lists assets, liabilities and net assets as of one date, a snapshot of the financial position.
The balance sheet is drawn up as of a closing date and always balances: assets = liabilities + net assets. Assets show how the funds are used; liabilities and net assets show where they came from. It is the only one of the four statements that describes a single point in time; the others cover a period.
Answer (a)
Why not others:
- •(b) Statement of cash flows — cash coming in and going out over a period, split into operating, investing and financing activities
- •(c) Statement of changes in equity — how each item of net assets changed during the period
- •(d) Statement of profit or loss — revenue, expenses and profit over a period: operating results, not financial position
Key rule: A point in time means the balance sheet; a period means the profit or loss statement, the cash flow statement or the statement of changes in equity.
Corporate Activities · AI-written, may contain errors
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