Statement of Financial Position MCQs

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Accounting MCQ10- The primary purpose of the statement of financial position is to reflect

  • A. The fair value of the firm�s assets at some moment in time
  • B. The status of the firm�s assets in case of forced liquidation of the firm
  • C. The success of a company�s operations for a given amount of time
  • D. Items of value, debt, and net worth
  • Answer (D) is correct. The balance sheet presents three major financial accounting elements: assets (items of value), liabilities (debts), and equity (net worth). According to the FASB�s Conceptual Framework, assets are probable future economic benefits resulting from past transactions or events. Liabilities are probable future sacrifices of economic benefits arising from present obligations as a result of past transactions or events. Equity is the residual interest in the assets after deduction of liabilities.
  • Correct Answer: Option D

Accounting MCQ8- Prepaid expenses are valued on the statement of financial position at the

  • A. Cost to acquire the asset
  • B. Face amount collectible at maturity.
  • C. Cost to acquire minus accumulated amortization
  • D. Cost less expired or used portion
  • Answer (D) is correct. Prepaid expenses, such as supplies, prepaid rent, and prepaid insurance, are reported on the balance sheet at cost minus the expired or used portion. These are typically current assets.
  • Correct Answer: Option D