___________ is to allow the owner, investors, creditors and others with an interest to know the appropriate book worth of the business at a particular date.
Click on the arrows to vote for the correct answer
A. B. C. D.B
The correct answer to the question is B. Balance sheet.
The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific date. It presents the company's assets, liabilities, and shareholders' equity, which collectively represent the book worth of the business.
Let's break down the components of a balance sheet:
Assets: Assets are the resources owned by a company that have economic value and are expected to generate future benefits. They can be categorized into current assets and non-current assets. Current assets include cash, accounts receivable, inventory, and short-term investments. Non-current assets include property, plant, and equipment, long-term investments, and intangible assets.
Liabilities: Liabilities are the obligations or debts owed by a company to external parties. Similar to assets, liabilities can be divided into current liabilities and non-current liabilities. Current liabilities include accounts payable, short-term loans, and accrued expenses. Non-current liabilities include long-term loans, bonds payable, and deferred tax liabilities.
Shareholders' Equity: Shareholders' equity represents the residual interest in the assets of a company after deducting its liabilities. It includes the initial investment by shareholders (common stock), retained earnings (accumulated profits that have not been distributed as dividends), and other comprehensive income.
The balance sheet equation is as follows:
Assets = Liabilities + Shareholders' Equity
By presenting these three components, the balance sheet provides a comprehensive view of the company's financial position. It allows the owner, investors, creditors, and other stakeholders to assess the business's worth and financial health at a specific date.
Option A, Equity, refers to the ownership interest in a company. While equity is an important component of the balance sheet, it does not capture the complete picture of a company's financial position.
Option C, Income statement, is another crucial financial statement that presents the revenues, expenses, gains, and losses incurred by a company over a specific period. The income statement shows the company's financial performance, but it does not provide the specific book worth of the business at a particular date.
Option D, Financial record, is a broad term that can encompass various financial documents and records. While financial records are important for maintaining and tracking financial transactions, they do not specifically refer to the statement that shows the appropriate book worth of the business at a particular date.
In summary, the balance sheet is the financial statement that allows stakeholders to know the appropriate book worth of the business at a particular date by presenting the company's assets, liabilities, and shareholders' equity.