Financial Statements for a Sole Proprietorship- Part 1

What is the primary purpose of an Income Statement in a sole proprietorship?

• To show the assets and liabilities at a specific point in time.

• To display the revenues and expenses over a specific period, showing net income or loss.

• To track the cash inflows and outflows during the financial year.

• To list the owner's personal expenses and investments.

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DOK Level 1: Recall

Which of the following is considered a current asset on the Balance Sheet?

• Trademarks

• Equipment

• Inventory

• Goodwill

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DOK Level 1: Recall

How do you calculate the net income from an Income Statement?

• Total Revenues minus Total Expenses

• Total Assets minus Total Liabilities

• Cash Inflows minus Cash Outflows

• Current Assets minus Current Liabilities

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DOK Level 1: Recall

What does a positive cash flow from operating activities indicate in a Cash Flow Statement?

• The business is investing heavily in long-term assets.

• The business has sold a significant portion of its assets.

• The business is efficiently generating more cash than it spends on its operations.

• The business is borrowing more money than it is repaying.

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DOK Level 2: Skill/Concept

• 0.5

• 2.0

• 1.5

• 10.0

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DOK Level 2: Skill/Concept

• Assets + Liabilities

• Assets - Liabilities

• Liabilities - Assets

• (Assets + Liabilities) / 2

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DOK Level 2: Skill/Concept

In a Statement of Changes in Owner's Equity, what would be recorded?

• Purchase of equipment for the business.

• Loan taken from a bank.

• Withdrawals made by the owner.

• Payment to creditors.

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DOK Level 1: Recall

Which financial statement would you analyze to assess a company's liquidity?

• Income Statement

• Balance Sheet

• Cash Flow Statement

• Statement of Owner's Equity

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DOK Level 1: Recall

What does the debt-to-equity ratio measure in financial ratios analysis?

• The proportion of company assets financed by debts and equity.

• The proportion of company assets financed through equity.

• The proportion of company assets financed through debt.

• The proportion of company's debt to its equity.

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DOK Level 2: Skill/Concept

Which of the following would appear on the report form of a Balance Sheet for a sole proprietorship?

• Sales Revenue

• Cash from Financing Activities

• Owner's Capital

• Cost of Goods Sold

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DOK Level 1: Recall