Question 1

A balance sheet is like a photograph of your financial condition,while an income and expense statement is like a motion picture.

Accepted Answer

A balance sheet captures a snapshot of a company's financial position at a specific point in time, while an income and expense statement shows the company's financial performance over a period of time, usually one year. Therefore, a balance sheet can be likened to a photograph, and an income and expense statement can be likened to a motion picture.

Question 2

A charge made on your credit card becomes a liability as soon as the charge is incurred.

Accepted Answer

A liability is a debt or obligation that a person or company owes to someone else. When a charge is made on a credit card, the cardholder essentially takes out a loan from the credit card company to pay for the purchase. Therefore, the charge immediately becomes a liability for the cardholder. The liability is not fully settled until the cardholder pays off the balance on their credit card statement.

Question 3

Approximately 50 percent of Americans prepare a detailed household budget.

Accepted Answer

According to a survey conducted by Bankrate in 2019, only 30 percent of Americans prepare a detailed household budget.

Question 4

Only the current month's payment on your mortgage loans would be listed on the personal balance sheet as a liability.

Accepted Answer

The entire outstanding balance on mortgage loans would be listed as a liability on the personal balance sheet, not just the current month's payment.

Question 5

A budget is a detailed financial forecast.

Accepted Answer

A budget is a plan that outlines an organization's financial and operational goals, and it details how much money is designated for various expenses, including salaries, marketing, and utilities.

Question 6

Money I loaned to a friend is a liability on my balance sheet.

Accepted Answer

Money loaned to a friend is considered an asset on your balance sheet because it is an amount owed to you, not a debt you owe.

Question 7

A house and land are examples of real property.

Accepted Answer

Real property refers to land and anything that is attached to it, such as buildings or structures. A house and the land it sits on are both examples of real property.

Question 8

Most types of personal property depreciate shortly after being put into use.

Accepted Answer

Most types of personal property such as electronic gadgets, equipment, furniture, vehicles, etc. tend to depreciate in value shortly after they are put into use. This means that they lose their monetary value over time due to wear and tear, obsolescence, or changes in market demand. Exceptions to this may include certain types of antiques or collectibles, whose value may appreciate over time.

Question 9

The income and expense statement provides a measure of financial performance over a period of time.

Accepted Answer

The income and expense statement, also known as the profit and loss statement, provides a summary of revenues, expenses, and profits over a specific period of time, usually a month, quarter, or year. It is an important tool for evaluating a company's financial performance over time.

Question 10

The income and expense statement looks forward in time,while a budget is backward looking.

Accepted Answer

The income and expense statement and budget both look forward in time, but the main difference is that the income and expense statement shows actual revenue and expenses incurred during a specific time period, while a budget is a plan for expected revenue and expenses for a future time period.

Question 11

Personal financial statements help you identify potential financial problems.

Accepted Answer

Personal financial statements provide a clear picture of your income, expenses, assets and liabilities. Through the evaluation of these statements, you can identify any potential financial issues such as overspending, high debt-to-income ratio or insufficient savings.

Question 12

Your auto loan payments would be listed as an expense on the income and expense statement.

Accepted Answer

Auto loan payments are a regular and recurring expense that would be included on an income and expense statement.

Question 13

Investments are mostly intangible financial assets acquired to achieve long-term personal financial goals.

Accepted Answer

Investments such as stocks, bonds, and mutual funds are intangible financial assets acquired with the goal of achieving long-term financial objectives, such as retirement or building wealth.

Question 14

The value of assets purchased on credit should be included on the asset side of your personal balance sheet.

Accepted Answer

When assets are purchased on credit, it means you have an obligation to pay back the debt in the future. However, at the time of purchase, the asset belongs to you and should be included on the asset side of your personal balance sheet. The liability for the debt should be included on the liability side of the balance sheet.

Question 15

Investment assets include items such as boats or automobiles.

Accepted Answer

Investment assets typically refer to financial assets like stocks, bonds, or real estate that are expected to generate income or appreciate in value, whereas boats or automobiles are generally considered personal property or depreciating assets.

Question 16

A home and land should be recorded on the personal balance sheet at their original cost.

Accepted Answer

A home and land should be recorded on the personal balance sheet at their fair market value, not their original cost. This is because the fair market value reflects the true value of the asset, which may have appreciated or depreciated over time.

Question 17

A budget is a detailed statement of what income and expenses occurred over a past period.

Accepted Answer

A budget is a plan for how income and expenses will occur in a future period, not a statement of what has already occurred.

Question 18

All assets,regardless of category,should be recorded on your personal balance sheet at their current fair market value.

Accepted Answer

Not all assets are recorded at fair market value; some may be recorded at historical cost or depreciated value, depending on accounting principles and the nature of the asset.

Question 19

A personal balance sheet shows your financial condition as of the time the statement is prepared.

Accepted Answer

A personal balance sheet is a financial statement that provides a snapshot of an individual's financial condition at a specific point in time. It typically lists all of the individual's assets, liabilities, and net worth, which helps to provide a clear picture of their overall financial health.

Question 20

Jewelry,furniture,and computers are examples of personal property.

Accepted Answer

Personal property refers to any type of property that can be owned by an individual, such as jewelry, furniture, and computers. Therefore, the statement is true.

Quiz 2: Using Financial Statements and Budgets