Balance Sheet

Question 1

Classification of assets and liabilities allows users to evaluate…

Answer 1

Business stability, liquidity and leverage/gearing.

Question 2

Notes

Answer 2

Expand on entries contained in the balance sheet.

Question 3

Property, Plant and Equipment Note

Answer 3

Contains the cost price of any property, plant and equipment as well as accumulated depreciation, and the total property, plant and equipment at book value.

Question 4

Share Capital Note

Answer 4

Details of changes in share capital.
Ie:
430,000 ordinary shares, fully paid … $420,000

Question 5

Reserves Note

Answer 5

Changes in reserves.
Ie:
Asset revaluation … 8000
General … 3000
Total … $11,000

Question 6

Dividends Note

Answer 6

Sets out the dividends paid AND recommended for the year.
Ie:
The following dividend was paid in the year ended 30 June 2029:
430,000 ordinary shares, $0.05 per share … $21,500
The directors have recommended a final dividend for the year ended 30 June 2029:
430,000 ordinary shares, $0.07 per share … $30,100.

Question 7

Define cash and cash equivalents and explain whether gold bars stored in the company safe are cash equivalents.

Answer 7

Definition – cash is cash on hand and demand deposits.
Definition – cash equivalents are short-term highly liquid assets that are readily
convertible into known amounts of cash and that are subject to an insignificant
risk of changes in value. It is usually convertible into cash within three months.
There is a significant, almost inevitable risk that gold bars will change in value.
Gold bars are not cash equivalents due the risk of change in value.