Question

which statement is the cornerstone of accounting?

which statement is the cornerstone of accounting?

Homework Answers

Answer #1

A balance sheet, also known as a "statement of financial position", reports a company's assets, liabilities and owners' equity (net worth) as at the year end or specific point in time.

It also provides a basis for computing rates of return and other ratios as follows:

  • Debt to Equity ratio
  • Current ratio
  • Stock Turnover ratio
  • Average Collection Period
  • Cash Conversion cycle, etc.

Balance sheet provides the details of what a company's owns and owes, as well as the amount invested by owners.

Answer:

The balance sheet, together with the income statement and cash flow statement, is the cornerstone of accounting.

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