ACCT 1004 Fundamentals of Accounting COMPLETED EXAM w/ RATIONALES 2026 (Complete And Verified Study material) (18pages) LEARNEXAMS

1. What is the main purpose of a balance sheet?

A) To show the sources and uses of cash for a business

B) To show the revenues and expenses of a business for a period

C) To show the assets, liabilities, and equity of a business at a point in

time

D) To show the profitability and efficiency of a business operations

Answer: C. A balance sheet is a snapshot of a business's financial position

at a given date. It shows what the business owns (assets), what it owes

(liabilities), and what it has invested (equity).

2. What is the accounting equation?

A) Assets = Liabilities + Equity

B) Assets = Revenues - Expenses

C) Equity = Assets - Liabilities

D) Equity = Revenues - Expenses

Answer: A. The accounting equation is the basis of the balance sheet. It

states that the total assets of a business must equal the total liabilities and

equity.

3. What is an income statement?

A) A statement that shows the changes in equity for a period

B) A statement that shows the inflows and outflows of cash for a period

C) A statement that shows the revenues and expenses for a period

D) A statement that shows the assets and liabilities for a period

Answer: C. An income statement is a summary of a business's

performance for a period. It shows how much revenue the business earned

and how much expenses it incurred.