Acct 2121 Chpt 2

Question 1

What are Classified Statement of Financial Position?

Answer 1

A classified statement of financial position generally contains the following standard classifications

Question 2

What are the three section in a statement of Financial Position?

Answer 2

Assets, Liabilities, shareholders Equity

Question 3

What are currents Assets

Answer 3

Assets expected to be converted to cash, sold or used within one year, usually listed i order of liquidity
Such As: cash, accounts receivable, inventory

Question 4

What are non-current Assets?

Answer 4

Assets not expected to be converted to cash, sold or used in the business within one year of the financial statement date
Such as Property, Plant, and equipment

Question 5

What are Long-term Investments?

Answer 5

Multi-year investments in Debt securities: loans, notes, bonds, mortgages, and equity Securities: shares of other companies. Not intended to be sold within a year

Question 6

What are Property, plant, and equipment ?

Answer 6

Tangible assets with relatively long lives, used in operating a business, listed in order of permanency.
Such as: Land, buildings, and vehicles

Question 7

What is Concept of Depreciation ?

Answer 7

Expense the cost of property, plant, and equipment over the asset’s estimated life, companies assign a portion of the cost of an asset to expense each year

Question 8

What is Depreciation recorded on?

Answer 8

Depreciation is recorded on buildings, equipment but not on land

Question 9

What is Accumulated depreciation?

Answer 9

account that shows the total amount of depreciation recorded to date, asset account

Question 10

What are intangible Assets?

Answer 10

Non-current assets that do not have physical substance, generate future value for company
Such as: patents, copyrights, goodwill

Question 11

What current liabilities?

Answer 11

Obligations that are to be paid or settled within the one year of the financial statement date
Such as: Bank indebtedness, accounts payable, deferred revenue

Question 12

What are Non-Current Liabilities?

Answer 12

Obligations expected to be paid or settled after one year
Such as: Bank loan/ notes payable, lease obligations

Question 13

What is Share capital?

Answer 13

investment of cash in the company by shareholders in exchange for shares

Question 14

What is retained earnings?

Answer 14

Cumulative net income kept for use in the company

Question 15

What is the Objective of Financial Reporting?

Answer 15

To provide financial information that is useful to existing and potential investors, who make decisions about buying, selling, and holding equity and debt; Providing or settling loans or other credit

Question 16

What is Relevance?

Answer 16

May have predictive value or confirmatory value, Materiality is important: will information influence decisions

Question 17

what is Faithful representation?

Answer 17

Information should reflect economic reality, it must be complete, neutral, and free from error

Question 18

What are cost constraints?

Answer 18

The benefits of financial reporting should justify the costs of providing and using it

Question 19

What is the Going Concern Assumption?

Answer 19

The business will continue operating in the foreseeable future; provides a foundation for accounting and justification for using cost as the value of certain assets

Question 20

What are historical cost?

Answer 20

assets and liabilities should be recorded at their cost when acquired; Not only at time of purchase, but throughout the life of each asset and liability

Question 21

What is fair value ?

Answer 21

Certain assets and Liabilities should be recorded and reported at fair value