Accounting Fundamentals Certification (AFC) Practice Test

Image Description

Question: 1 / 400

What information does a balance sheet provide?

The profit or loss over a period

The cash flows of a business

The financial position of a business on a specific date

A balance sheet provides a snapshot of a company's financial position at a specific point in time, detailing its assets, liabilities, and shareholders' equity. This document is crucial because it allows stakeholders to assess what the company owns and owes, offering insights into its liquidity and financial stability.

For instance, by examining the balance sheet, investors and creditors can evaluate whether the company has sufficient resources to meet its obligations and how investments are funded—whether through debt or equity. The balance sheet reflects these elements as of the date it is prepared, distinguishing it from other financial statements that cover performance over a period, such as the income statement, which shows profit or loss, or the cash flow statement, which details the cash inflows and outflows during a specific timeframe.

Get further explanation with Examzify DeepDiveBeta

The total expenses incurred

Next Question

Report this question

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy