1. Equity can also be thought of as what?

❌ The amount that owners of the company have a claim to
❌ The company’s net worth
❌ Assets minus liabilities
✅ All of the above

Explanation:
All these statements describe equity — it’s owners’ claim, net worth, and assets minus liabilities.

2. People who contributed capital in exchange for ownership are called?

❌ Suppliers
✅ Shareholders
❌ Both of the above
❌ None of the above

Explanation:
Only shareholders contribute capital for ownership, not suppliers.

3. Portion of earnings retained by the company is called?

✅ Retained earnings
❌ Equity
❌ APIC
❌ Common stock

Explanation:
Retained earnings = accumulated profits that are not distributed.

4. Retained earnings decrease due to?

❌ A net loss
❌ Payment of cash dividends
✅ Both of the above
❌ Neither

Explanation:
Loss reduces earnings and dividends reduce retained earnings.

5. APIC and common stock are listed separately?

✅ True
❌ False

Explanation:
They appear as separate equity line items on the balance sheet.

6. Difference between resources earned and dispersed is?

✅ Net income
❌ Common stock
❌ Equity
❌ Cash

Explanation:
Net income = revenues – expenses.

7. Where is net income dumped at period end?

✅ Retained earnings
❌ Liabilities
❌ Common stock
❌ APIC

Explanation:
Net income flows into retained earnings.

8. Net worth can be split into contributed value + earned value?

✅ True
❌ False

Explanation:
Equity = contributed capital + retained earnings.

9. Who receives dividends?

✅ Owners/shareholders
❌ Chairman
❌ Employees
❌ General public

Explanation:
Only shareholders receive dividends.

10. Assets minus liabilities equals?

❌ Expenses
❌ Net income
❌ Revenue
✅ Equity

Explanation:
Formula: Equity = Assets − Liabilities.

11. How quickly an asset converts to cash is?

✅ Liquidity
❌ Balanced
❌ Income
❌ Cash flow

Explanation:
Liquidity = ease of converting to cash.

12. Asset section arranged by?

❌ Smallest to largest balance
❌ Least liquid to most liquid
✅ Most liquid to least liquid
❌ Largest to smallest balance

Explanation:
Cash first → then receivables → then inventory → etc.

13. Which statement is the statement of financial position?

✅ Balance sheet
❌ Statement of cash flows
❌ Income statement
❌ Net income

Explanation:
Balance sheet shows financial position at a point in time.

14. Liabilities + owner’s equity = ?

❌ Revenue
❌ Gross profit
✅ Assets
❌ Net income

Explanation:
Basic accounting equation.

15. Financial statements represent position & performance?

✅ True
❌ False

Explanation:
Yes, they show financial status and results.

16. Which is NOT an asset?

❌ Property, plant, and equipment
✅ Accrued liabilities
❌ Inventory
❌ Prepaid expenses

Explanation:
Accrued liabilities are liabilities, not assets.

17. If not current asset, it’s non-current?

✅ True
❌ False

Explanation:
All assets are either current or non-current.

18. Balance sheet sections are: assets, liabilities, net income?

❌ True
✅ False

Explanation:
Correct sections: Assets, Liabilities, Equity, not net income.

19. Which is a snapshot on a particular date?

✅ Balance sheet
❌ Income statement
❌ Both
❌ None

Explanation:
Balance sheet shows status at a specific point in time.

20. Balance sheet answers “what you own” and “what you owe”?

✅ True
❌ False

Explanation:
Assets = what you own, Liabilities = what you owe.

🧾 Summary Table

Q	Correct Answer
1	All of the above
2	Shareholders
3	Retained earnings
4	Both of the above
5	True
6	Net income
7	Retained earnings
8	True
9	Owners/shareholders
10	Equity
11	Liquidity
12	Most liquid to least liquid
13	Balance sheet
14	Assets
15	True
16	Accrued liabilities
17	True
18	False
19	Balance sheet
20	True

Equity and How the Balance Sheet Fits Together Quiz :Understanding Financial Statements: Company Position (Fundamentals of Accounting Specialization) Answers 2025