The Income Statement and the Balance Sheet Are Essentially the Same

question 18

Multiple Choice

The income statement and the balance sheet are essentially the same for sole traders and partnerships except for transactions that directly affect:

• A) profit.
• B) liabilities.
• C) assets.
• D) equity.

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Definitions:

Property, Plant, and Equipment

Long-term assets vital to business operations and not easily converted into cash, encompassing real estate, factories, machinery, and more.

Buildings

Assets classified in accounting as long-term or fixed assets, representing structures owned by a company for business use.

Return On Assets

A profitability ratio that measures how efficiently a company uses its assets to generate profit, calculated as net income divided by total assets.

Asset Turnover

A ratio that measures the efficiency of a company's use of its assets in generating sales revenue.