Accounting 1.1

Question 1

Income Statement Purpose

Answer 1

This allows (insert the user name here) to make decisions about (make up a decision relating to Revenue, Expenses or Profit related to the question)

Question 2

Components of income statement

Answer 2

Income – Sales or Fees
Other Income
Cost of Goods Sold
Expenses 
Distribution
Administrative
Finance Costs
Net Profit

Question 3

Limitations of income statements

Answer 3

Limitations

Does not include non-financial information. E.g. quality of goods or services provided, quality of staff, foot traffic.

Some expenses are based on estimates eg depreciation, doubtful debts which maybe incorrect and so final profit is inaccurate.

Question 4

Statement of Financial Position/Balance sheet

Answer 4

This allows (insert the user name here) to make decisions about (make up a decision relating to Assets, Liabilities or Equity related to the question).

Question 5

Components of balance sheet

Answer 5

Current Assets
Non Current Assets
Plant Property Equipment
Investments
Intangible 
Current Liabilities
Non Current Liabilities
Owners Equity

Question 6

Limitations of a balance sheet

Answer 6

Assets value are recorded at Historical Cost so market valuation may have changed and the asset maybe either under or over stated.

Accumulated Depreciation and Allowance for Doubtful Debts are based on estimates

Does not show non-financial information. E.g. the quality and age of assets, the ability of staff.