An Introduction to Understanding Financial Statements

Understanding Financial Statements

Practice Excercise

The following excercise should aid in understanding Double Entry Accounting. Please answer the questions below and proceed by clicking the Appropriate button located next to the answer

1.	A company has $1,000,000 Owners' Equity and $75,000 in liabilities. What are the assets for the company?

		$1,000,000
		$75,000
		$925,000
		None of the above

2.	A company has cash in the bank of $850,000, inventory of $50,000 and a building worth $100,000. These are the only assets for the company. The company has liabilities that amount to $925,000. How much is owners' equity in this company?

		$1,000,000
		$75,000
		$925,000
		None of the above

3.	Which of the following is not an asset:

		Retained earnings
		A roto-tiller
		A stapler
		20 kilos of fertilizer
		All of the above

4.	A share of stock in General Motors that your company owns would be:

		A liability
		Owner's equity
		An asset
		All of the above
		None of the above

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