2. The Financial Position

Question 1

What is the basic accounting equation?

Answer 1

Equity = Assets - Liabilities

Question 2

What are non-current liabilities?

Answer 2

Liabilities that does not form part of current liabilities.

Liabilities that have a useful life of more than one year.

Question 3

What are non-current assets?

Answer 3

Assets than does not form part of current assets.

Assets that have a useful life of longer than one year.

Question 4

What are current liabilities?

Answer 4

Liabilities that are expected to be settled within one year.

Question 5

What are current assets?

Answer 5

Assets that intends to be converted to cash.

The conversion intends to happen within 12 months.

Question 6

Name two types of assets?

Answer 6

1. Current assets

2. Non-current assets

Question 7

Name three examples of non-current liabilities:

Answer 7

1. Long-term loans
2. Mortgage
3. Debentures

Question 8

Name five examples of non-current assets:

Answer 8

1. Land
2. Buildings
3. Vehicles
4. Furniture
5. Equipment

Question 9

Name five examples of current liabilities:

Answer 9

1. Creditors/ Trade payables
2. Bank overdrafts
3. Current portion of long-term borrowings
4. Short term borrowings
5. Accrued expenses

Question 10

Name five examples of current assets:

Answer 10

1. Trade inventories
2. Debtors/ trade receivables
3. Cash float
4. Petty cash
5. Accrued income

Question 11

In order for the accounting equation to always balance it requires the involvement of … for each transaction.

Answer 11

Two accounts

Question 12

Every entity for which separate financial records are kept is a … entity.

Answer 12

financial accounting

Question 13

Assets, liabilities, equity, income & expenses are called the … of financial statements.

Answer 13

Elements