3 - The Statement of Financial Position

Question 1

What makes a set of financial statements fairly presented?

Answer 1

If they comply with accounting standards (IAS’s and IFRS’s) and are within the conceptual framework. Where they comply with IFRS must be explicitly stated in the FS and they can only be made if all requirements are met.

Question 2

What are bonus issue shares?

Answer 2

When new share are issued for free in proportion to the number of share already owned by the shareholder i.e. 2:1

Question 3

What are right issue shares?

Answer 3

When shares are issued for a price that is lower than market value but hight than nominalvalue often in proportion to the number of shares already owned

Question 4

What is a revaluation surplus?

Answer 4

A reserve that raises when an asset is revalued

Question 5

What are retained earnings?

Answer 5

The accumulation of profits/losses over the year after deducting dividends

Question 6

When are dividends included in a set of financial statements?

Answer 6

When they are declared before the year end (any proposed dividends that have not been approved before the year end should still be disclosed)