3. Measuring & Reporting Financial Position

Question 1

Give a formula for assets

Answer 1

Assets = liabilities + equity

Question 2

Where does a business get it’s money from?

Answer 2

The owners (equity)
The lenders (liabilities)

Question 3

What is meant by “share capital”?

Answer 3

Money put into the business?

Question 4

What is mean by “reserves”?

Answer 4

Money retained from profits/surpluses

Question 5

What is meant by “loan capital”?

Answer 5

Long term borrowing

Question 6

What is meant by “trade/other credit”?

Answer 6

Short term creditors payables

Question 7

What is meant by “assets”?

Answer 7

Things the company owns

Question 8

What are “non-current” assets?

Answer 8

Held long term to help the business

Question 9

What are “current” assets?

Answer 9

Disposable usually within 12 months

Question 10

What are the key characteristics of assets?

Answer 10

Probable future
Business has exclusive control right
Capable of measuring in monetary terms

Question 11

What is meant by “liabilities” and how are they settled?

Answer 11

Money the company owes

By outflow cash/cheque

Question 12

What is equity in the statement of financial position?

Answer 12

Any funds contributed to the business by the owner of business for use by the business in its normal operations

Question 13

Non-current, intangible assets

Answer 13

Patents
Trademarks
Brands
Goodwill

Question 14

Non-current, tangible assets

Answer 14

Land/buildings
Plant/machinery
Vehicles
Equipment

Question 15

Current assets

Answer 15

Inventory
Trade receivables
Prepayments
Cash

Question 16

Current liabilities

Answer 16

Trade payables
Accrued expenses
Corporation tax
VAT
Payroll tax
Short term loans
Overdrafts

Question 17

Non-current liabilities

Answer 17

Borrowing (debentures, mortgages)

Long term bank loans