38 Lecture

1. What is the primary financial statement that reports a company's financial position at a specific point in time? a) Income statement b) Statement of cash flows c) Balance sheet d) Statement of changes in equity Answer: c) Balance sheet

2. Which financial statement reports a company's revenues, expenses, and net income or loss for a specific period? a) Balance sheet b) Income statement c) Statement of cash flows d) Statement of changes in equity Answer: b) Income statement

3. What is the purpose of the statement of cash flows? a) Report a company's financial position at a specific point in time b) Report a company's revenues, expenses, and net income or loss for a specific period c) Report a company's cash inflows and outflows during a specific period d) Report the changes in a company's equity over a period of time Answer: c) Report a company's cash inflows and outflows during a specific period

4. What is the primary financial statement that reports the changes in a company's equity over a period of time? a) Income statement b) Statement of cash flows c) Balance sheet d) Statement of changes in equity Answer: d) Statement of changes in equity

5. Which financial statement includes information about a company's current assets and liabilities? a) Income statement b) Statement of cash flows c) Balance sheet d) Statement of changes in equity Answer: c) Balance sheet

6. What is the primary financial statement used to evaluate a company's liquidity? a) Income statement b) Statement of cash flows c) Balance sheet d) Statement of changes in equity Answer: b) Statement of cash flows

7. Which financial statement includes information about a company's revenues, cost of goods sold, and gross profit? a) Income statement b) Statement of cash flows c) Balance sheet d) Statement of changes in equity Answer: a) Income statement

8. Which financial statement includes information about a company's long-term assets and liabilities? a) Income statement b) Statement of cash flows c) Balance sheet d) Statement of changes in equity Answer: c) Balance sheet

9. What is the purpose of the notes to the financial statements? a) To provide additional details about the company's financial statements b) To provide a summary of the company's financial performance c) To report a company's cash inflows and outflows during a specific period d) To report the changes in a company's equity over a period of time Answer: a) To provide additional details about the company's financial statements

10. Which financial statement includes information about a company's stock issuances, dividends, and net income? a) Income statement b) Statement of cash flows c) Balance sheet d) Statement of changes in equity Answer: d) Statement of changes in equity

1. What is the purpose of financial statements in a limited company?

Answer: The purpose of financial statements in a limited company is to provide transparency about the company's financial health and to assist in making informed decisions.

2. What is a balance sheet, and what information does it provide?

Answer: A balance sheet is a financial statement that reports a company's financial position at a specific point in time. It provides information about a company's assets, liabilities, and equity.

3. Explain the difference between a cash basis and accrual basis of accounting.

Answer: The cash basis of accounting records transactions when cash is received or paid, while the accrual basis records transactions when they occur, regardless of when cash is received or paid.

4. What is the purpose of the income statement, and what information does it provide?

Answer: The income statement reports a company's revenues, expenses, and net income or loss for a specific period, providing information about the company's profitability.

5. What is the purpose of the statement of cash flows, and what information does it provide?

Answer: The statement of cash flows reports a company's cash inflows and outflows during a specific period, providing information about a company's liquidity.

6. What is the purpose of the notes to the financial statements?

Answer: The notes to the financial statements provide additional details and explanations about the company's financial statements.

7. What is the difference between current assets and long-term assets?

Answer: Current assets are assets that are expected to be converted into cash within one year, while long-term assets are expected to be held for longer than one year.

8. What is the purpose of the statement of changes in equity?

Answer: The statement of changes in equity reports the changes in a company's equity over a period of time, providing information about the company's financial performance.

9. What is the difference between a liability and an expense?

Answer: A liability is a debt or obligation that a company owes, while an expense is a cost incurred by the company in its operations.

10. What is the purpose of financial ratios, and how can they be used to evaluate a company's financial health?

Answer: Financial ratios are used to analyze a company's financial statements and provide insight into the company's financial health. They can be used to evaluate liquidity, profitability, solvency, and other aspects of a company's financial performance.

Financial statements of limited companies are crucial documents that provide information about the financial health of a company. They are used to communicate the financial position, performance, and cash flows of a company to its stakeholders. Limited companies are required by law to prepare financial statements that comply with accounting standards and regulations. The key components of financial statements for a limited company are the balance sheet, income statement, statement of cash flows, and notes to the financial statements. The balance sheet reports the assets, liabilities, and equity of a company at a specific point in time. It provides information about the company's liquidity, solvency, and financial position. The income statement reports the revenues, expenses, and net income or loss for a specific period. It provides information about the company's profitability. The statement of cash flows reports the cash inflows and outflows of a company during a specific period. It provides information about the company's liquidity. The notes to the financial statements provide additional details and explanations about the company's financial statements. They may include information about accounting policies, significant transactions, contingent liabilities, and other relevant information. The statement of changes in equity reports the changes in a company's equity over a period of time. It provides information about the company's financial performance. Financial ratios can be used to analyze a company's financial statements and provide insight into its financial health. Ratios can be used to evaluate liquidity, profitability, solvency, and other aspects of a company's financial performance. Some commonly used ratios include the current ratio, quick ratio, debt-to-equity ratio, return on equity, and earnings per share. In summary, financial statements of limited companies are important documents that provide valuable information about a company's financial health. They help stakeholders make informed decisions about the company and its operations. It is important for limited companies to prepare financial statements that comply with accounting standards and regulations and to use financial ratios to analyze their financial performance.