Financial Statement Purpose.

Question 1

Income Statement Purpose.

Answer 1

Achieved
To show the Revenue, Expenses and Net Profit for the period for the (insert name of the Business here).
Merit
This allows (insert the user name here) to make decisions about (make up a decision relating to Revenue, Expenses or Profit related to the question)

Question 2

Components of and Income Statement.

Answer 2

•	Income – Sales or Fees
•	Other Income
•	Cost of Goods Sold
•	Expenses 
o	Distribution
o	Administrative
o	Finance Costs
•	Net Profit

Limitations

Does not include non-financial information. E.g. quality of goods or services provided, quality of staff, foot traffic.

Some expenses are based on estimates eg depreciation, doubtful debts which maybe incorrect and so final profit is inaccurate.

Question 3

Limitation of Income Statement.

Answer 3

Does not include non-financial information. E.g. quality of goods or services provided, quality of staff, foot traffic.

Some expenses are based on estimates eg depreciation, doubtful debts which maybe incorrect and so final profit is inaccurate.

Question 4

Purpose of Statement of Financial Position- Balance Street.

Answer 4

To measure Assets, Liabilities and Equity at one point in time for the (insert name of the Business here).
Merit
This allows (insert the user name here) to make decisions about (make up a decision relating to Assets, Liabilities or Equity related to the question).

Question 5

Components of a Balance Sheet.

Answer 5

o	Current Assets
o	Non Current Assets
o	Plant Property Equipment
o	Investments
o	Intangible 
o	Current Liabilities
o	Non Current Liabilities
o	Owners Equity

Question 6

Limitations of a Balance Sheet.

Answer 6

Assets value are recorded at Historical Cost so market valuation may have changed and the asset maybe either under or over stated.

Accumulated Depreciation and Allowance for Doubtful Debts are based on estimates

Does not show non-financial information. E.g. the quality and age of assets, the ability of staff.