Question:
The balance sheet is composed of:
a) owners’ equity, assets, and liabilities
b) expenses, revenue, and net income
c) revenue, expenses, and owner’s equity
d) assets, expenses, and net income
e) assets, liabilities, and revenues
Answer:
The correct answer is a) owners’ equity, assets, and liabilities.
Explanation:
The balance sheet is a financial document that shows the financial status of a company at a specific time. It lists what the company owns (assets), what it owes (liabilities), and what is left over for the owners (owners’ equity). Owners’ equity is what’s left over after subtracting what the company owes from what it owns. Assets are things the company has that are worth money, and liabilities are debts or things the company owes to others. By looking at these three things together, we can get an idea of how well the company is doing financially and whether it can pay its debts.
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