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The Purpose of Notes on Financial Statements

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question 1 of 3

What do the notes to the financial statements do?

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1. What are the guidelines that dictate how items are reported in the body of the financial statements and what is disclosed in the notes to the financial statements?

2. The Widget Company is changing the way it does its accounting. They used to report revenue only when the money was received, but now they will report it once an order is made. How will this show in the notes?

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About This Quiz & Worksheet

Notes on financial statements are crucial to understanding these documents, as they provide additional insight into the way a business is functioning. This quiz/worksheet combo will check your understanding of the importance of these notes, including what they do and what guidelines they follow.

Quiz & Worksheet Goals

In these assessments, you'll be tested on:

  • Purpose of notes to financial statements
  • Guidelines that determine what items are disclosed and how items are reported
  • Method of accounting that reports income and expenses
  • Events that occurred after the date on a balance sheet
  • Liability that has yet to take place

Skills Practiced

This quiz and worksheet allow students to test the following skills:

  • Reading comprehension - ensure that you draw the most important information from the related notes on financial statements lesson
  • Defining key concepts - ensure that you can accurately define main phrases, such as those relating to events occurring after the posted date on a balance sheet and liabilities that haven't yet taken place but are likely to occur
  • Knowledge application - use your knowledge to answer questions about notes on financial statements

Additional Learning

To learn more about financial statements, review the accompanying lesson on The Purpose of Notes on Financial Statements. This lesson covers the following objectives:

  • Explain the importance of reading notes on financial statements
  • Define key terms, such as Generally Accepted Accounting Principles, cash basis, and subsequent events
  • Outline the different aspects of notes on financial statements
  • Discuss the purpose of the notes
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