Assets, Liabilities, and Capital

Question 1

IFRS means…?

Answer 1

The International Financial Reporting Standards

Question 2

It is a resource controlled by the enterprise as a result of past events and from
which future economic benefits are expected to flow to the enterprise

Answer 2

Asset

Question 3

What are the three properties of an asset?

Answer 3

1. Ownership
2. Economic Value
3. Resource

Question 4

Classifying assets based on how easy it is to convert them into cash.

Answer 4

Convertibility

Question 5

Classifying assets based on their physical existence (in other words,
tangible vs. intangible assets).

Answer 5

Physical Existence

Question 6

Classifying assets based on their business operation usage/purpose.

Answer 6

Usage

Question 7

If assets are classified based on their
convertibility into cash, assets are classified as either current assets or fixed assets. An
alternative expression of this concept is short-term vs. long-term assets.

Answer 7

Classification of asset as to Convertibility

Question 8

Are assets that can be easily converted into cash and
cash equivalents (typically within a year).

Answer 8

Current Assets

Question 9

Examples of Current Assets:

Answer 9

o Cash
o Cash equivalents
o Short-term deposits
o Stock
o Marketable securities
o Office supplies

Question 10

Are assets that cannot be

easily and readily converted into cash and cash equivalents.

Answer 10

Non-Current Assets or Fixed Assets

Question 11

Examples of non-current or fixed

assets include:

Answer 11

o Land
o Building
o Machinery
o Equipment
o Patents
o Trademarks

Question 12

If assets are classified based on their

physical existence, assets are classified as either tangible assets or intangible assets.

Answer 12

Classification of asset as to Physical Existence

Question 13

Are assets that have a physical existence (we can

touch, feel, and see them)

Answer 13

Tangible Assets

Question 14

Examples of tangible assets include:

Answer 14

o Land
o Building
o Machinery
o Equipment
o Cash
o Office supplies
o Stock
o Marketable securities

Question 15

Are assets that do not have a physical existence.

Answer 15

Intangible Assets

Question 16

Examples of intangible assets include:

Answer 16

o Goodwill
o Patents
o Brand
o Copyrights
o Trademarks
o Trade secrets
o Permits
o Corporate intellectual property

Question 17

If assets are classified based on their usage or

purpose, assets are classified as either operating assets or non-operating assets.

Answer 17

Classification of assets as to Usage

Question 18

are assets that are required in the daily operation of
a business. They are used to generate revenue from a
company’s core business activities.

Answer 18

Operating Assets

Question 19

Examples of operating assets include:

Answer 19

o Cash
o Stock
o Building
o Machinery
o Equipment
o Patents
o Copyrights
o Goodwill

Question 20

Are assets that are not required for daily

business operations but can still generate revenue.

Answer 20

Non-Operating Assets

Question 21

Examples of non-operating assets

include:

Answer 21

o Short-term investments
o Marketable securities
o Vacant land
o Interest income from a fixed or time deposit

Question 22

It is a
present obligation of the enterprise arising from past events, the settlement of which is expected to
result in an outflow from the enterprise of resources embodying economic benefits.

Answer 22

Liabilities

Question 23

Are liabilities that are due and payable within one year.

Answer 23

Current liabilities (short-term liabilities)

Question 24

Are liabilities that are due after a year or more.

Answer 24

Non-current liabilities (long-term liabilities)

Question 25

Are liabilities that may or may not arise, depending on a certain event.

Answer 25

Contingent liabilities

Question 26

It should be closely watched by management to make sure that the company possesses enough liquidity from current assets to guarantee that the debts or obligations can be met.

Answer 26

Current Liabilities

Question 27

Examples of current liabilities:

Answer 27

- Accounts payable - Interest payable - Income taxes payable - Bills payable - Bank account overdrafts - Accrued expenses - Short-term loans

Question 28

Current assets divided by current liabilities

Answer 28

The current ratio

Question 29

Current assets, minus inventory, divided by current liabilities

Answer 29

The quick ratio

Question 30

Cash and cash equivalents divided by current liabilities

Answer 30

The cash ratio

Question 31

Are debts or obligations that are due in over a year’s time. Long-term liabilities are an important part of a company’s long-term financing.

Answer 31

Non-current Liabilities

Question 32

List of non-current liabilities:

Answer 32

- Bonds payable - Long-term notes payable - Deferred tax liabilities - Mortgage payable - Capital leases

Question 33

Are liabilities that may occur, depending on the outcome of a future event.

Answer 33

Contingent Liabilities

Question 34

Examples of contingent liabilities:

Answer 34

- Lawsuits | - Product warranties

Question 35

It is also known as net assets or equity; It refers to what is left to the owners after all liabilities are settled.

Answer 35

Capital

Question 36

Capital is affected by the | following:

Answer 36

1. Initial and additional contributions of owner/s (investments), 2. Withdrawals made by owner/s (dividends for corporations), 3. Income, and 4. Expenses.

Question 37

Owner contributions and income (increase, decrease) capital.

Answer 37

Increase

Question 38

Withdrawals and expenses (increase, decrease) capital.

Answer 38

Decrease

Question 39

The terms used to refer to a company's capital portion varies according to the form of ownership. In a sole proprietorship business, the capital is called? In partnerships, it is? and in corporations?

Answer 39

Owner's Equity or Owner's Capital; Partners' Equity or Partners' Capital; , Stockholders' Equity.