Question

Which of the following statements is correct?

a) The balance sheet for a given year is designed to give us an idea of what happened to the firm during the course of the year.

b) The balance sheet for a given year tells us how much money the company earned during that year.

c) The difference between the total assets reported on the balance sheet and the liabilities reported on this statement tells us the current market value of the stockholders' equity, assuming the statements are prepared in accordance with generally accepted accounting principles (GAAP).

d) If a company's statements were prepared in accordance with generally accepted accounting principles (GAAP), the market value of the stock equals the book value of the stock as reported on the balance sheet.

e) The assets section of a typical company's balance sheet begins with cash, then lists the assets in the order in which they will probably be converted to cash, with the longest lived assets listed last

Answer 1

Answer:

Statement (e) is correct.
The assets section of a typical company's balance sheet begins with cash, then lists the assets in the order in which they will probably be converted to cash, with the longest lived assets listed last.

The balance sheet is designed to showcase the financial position of the company and give reports on company's assets, liabilitiesand equity.
The assets side of the balance sheet is prepared in a way that the most liquid asset is listed on the first i.e. cash then the second most liquid assets and so on. Therefore, the least liquid assets i.e. fixed assets will be listed at the last.
[Liquid asset refers to the asset that can be readily converted into cash]