Balance Sheets

Question 1

What is it also known as

Answer 1

Statement of Financial Position

Question 2

What is its purpose?

Answer 2

Provide users w overview of:
Wealth of entity (assets)
Level of Debt (liabilities)
Owner’s share of business (equity)

Question 3

What are the 2 types of formats

Answer 3

T bar and Narrative

Question 4

What are current assets

Answer 4

Expected to be used within 12 mnths

Question 5

What are current liabilities

Answer 5

Expected to be paid within 12mnths

Question 6

What are non-current liabilities/assets

Answer 6

Over 12mnths

Question 7

Why are ‘current’ and ‘non current’ terms used?

Answer 7

Helps to determine assets which are likely to provide long term v short term to entity and period over which debt needs to be repaid

Question 8

Limitations of Balance Sheet

Answer 8

• Prepped at certain date –> position at time may NOT be representative of position at other times
• NOT reflect an entity’s value, as some ITEMS not appearing on the report and other items recorded at a historical cost
• Amounts inc on balance sheets are based on choices, assumptions and estimates