Week 1

Question 1

What does it mean when a business is unincorporated?

Answer 1

The individual is not legally separate to the business.

Question 2

What is an Asset

Answer 2

A resource owned/controlled by a business with the expectation that it will generate future economic benefits.

Question 3

What is a liability?

Answer 3

Quantity of a value that a financial entity owes.

Question 4

What is Equity Capital?

Answer 4

Equity capital is funds paid into a business by investors in exchange for stock

Question 5

What is a sole trader?

Answer 5

One owner. Business in unincorporated. There are unlimited liabilities.

Question 6

Assets= (simple)

Answer 6

Liabilities + Equity Capital

Question 7

Equity Capital=

Answer 7

Amounts paid in by owners + Profit (income - expenses) – Amounts withdrawn by owners

Question 8

Profit =

Answer 8

Income - Expenses

Question 9

What is the expanded accounting equation?

Answer 9

Assets – Liabilities = Amounts paid in by owners + Income –Expenses – Amounts withdrawn by owners.

Question 10

What are the 3 main financial statements?

Answer 10

Statement of Profit loss (or income statement), Statement of financial position (or Balance sheet) and the statement of cash flows

Question 11

What is in the statement of profit loss?

Answer 11

Covers all income and expenses using the equation: profit = Income - Expenses

Question 12

What is in the Statement of Financial Position/ Balance Sheet

Answer 12

Includes all assets, liabilities and equity capital - as at the end of the accounting period. Uses: Equity Capital = Assets - Liabilities