Week 1: Intro to Accounting

Question 1

Financial Statement

Answer 1

Provides information about the assets, liabilities, equity, income and expenses of an entity.

Question 2

Balance Sheet (SOFP)

Answer 2

Items owned and used and claims on those items

Assets, Liabilities and Capital

Question 3

Income Statement

Answer 3

Summarises revenues and expenses over a period of time

How much profit is made for the period

Question 4

Cash Flow Statement

Answer 4

• Summarises all the different receipts and
  payments of cash
• Gives shareholders and other users
  information on the sources and uses of cash

Question 5

Asset Definition (UK FRS 102)

Answer 5

An asset is a resource controlled by the entity as a result of past events and future economic benefits are expected to flow to the entity.

Question 6

List 3 Items which meet the definition of assets

Answer 6

1) Recognition provides users with relevant information
2) Recognition provides users with a faithful representation of the asset
3) Recognition provides users with information that results in benefits exceeding the cost of providing information

Question 7

Non-Current Assets

Answer 7

• Assets intended for use on a continuing basis

- Examples: Land and building, motor vehicles, plant, equipment

Question 8

Current Assets

Answer 8

• Assets expected to be converted into cash within the trading cycle
• Examples: Inventories, Receivables

Question 9

Liabilities Definition (UK FRS 102)

Answer 9

Present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

Question 10

Non-current liabilities

Answer 10

Long term: Due to be paid after one year

Eg: Bank Loan

Question 11

Equity Definition (UK FRS 102)

Answer 11

Equity is the residual interest in the assets of the entity after deducting all its liabilities