Chap 5 - Trial Balance Flashcards
(9 cards)
What is trial balance?
Trial balance is a statement listing all the ledger accounts in the business at a certain date sorted according to their account nature
What is the purpose of a trial balance?
It is to facilitate the preparation of financial statements of the company and serves as a check on arithmetic accuracy on the transactions recorded
What is the limitation of trial balance?
It is not absolutely proof of accuracy, as it is unable to detect all errors.
What is a financial statement?
Financial statement are detailed summary reports used to communicate with stakeholders on the business activities and the financial performance of the company
Why do we need financial statements?
It is needed to evaluate and analyse the financial health, as well as the earning potential of the company, and to report to the authorities to ensure compliance of the company to the accounting standards
What are the two types of financial statements?
Statement of financial performance and statement of financial position
What is statement of financial position?
Statement of financial position is a snapshot of the companies financial position at a point in time where it shows the amount of assets, liabilities and equities of a business
What’s the difference between current assets and non-current assets?
Non-current assets are assets that are benefited beyond one financial year and not easily converted into cash, while current assets assets that benefits within one financial year and are easily converted into cash
What’s the difference between non-current, liabilities and liabilities?
Non-current liabilities are used to be paid beyond one financial year and its consolidated as long-term borrowing in the statement of financial position while current liabilities are due to be paid within one financial year
