(BALANCE SHEET)Financial Management Slide 10

Question 1

Define financial management

Answer 1

Involves managing the assets and liabilities and owners investment in the firm: generating the financial data required to make decisions , and using the tools of finance and to make effective decisions

Question 2

Why keep accounts

Answer 2

For compiling tax returns
For seeking financing
To inform management decisions

Question 3

What is monetary measurement

Answer 3

A common denominator

Question 4

When is monetary measurement a problem

Answer 4

In times of high inflation

Question 5

What is the concept of the business entity

Answer 5

A business is regarded as having an existence separate from its owners

Question 6

What is the double entry concept based on

Answer 6

The premise that each transaction within a business has a twofold effect on the business.At least TWO account affected by each business transaction

Question 7

What does the double entry rule state

Answer 7

That for every debit entry there must be a corresponding credit entry of equal amount and vice versa

Question 8

What shape are each account

Answer 8

T shaped

Question 9

What is the left hand side known as in T shaped accounts

Answer 9

Debit side

Question 10

What is the right hand side known as in T shaped account

Answer 10

Credit side

Question 11

Accruals / matching concept

Answer 11

Transactions occur and are recorded when agreements are made not when cash changes hands
Accounting attempts to match revenue with the expenses incurred to generate this revenue

Question 12

What are assets

Answer 12

Items of value OWNED by the business
Eg fixed assets and current assets

Question 13

What are liabilities

Answer 13

Sums of money OWED by the business
Eg current liabilities and long term liabilities

Question 14

What is capital

Answer 14

Represents the amount of money invested by the owner (owners equity)

Question 15

What is cash flow

Answer 15

Refers to cash movement through the business
It in invaluable for business success

Question 16

What is Net Profit

Answer 16

Revenue minus Expenses

Question 17

What is the formula for the accounting equation

Answer 17

Assets=Capital + Liabilities

Question 18

Balance Sheet

Answer 18

A “point in time” statement
Asset and liability position of the business entity at a particular date
Assets and how they have been funded

Question 19

Profit and Loss Account

Answer 19

A statement of income and expenditure for a specific time period
Measurement of profit for an accounting period

Question 20

Alternative names for Profit and Loss account

Answer 20

Income and Expenditure
Income Statement

Question 21

Cash Flow Statement

Answer 21

Statement of the main movements of cash into and out of the business over the accounting period

Question 22

Name the three principle statements involved in the financial account process

Answer 22

Balance Sheet
Profit and Loss Account
Cash Flow Statement

Question 23

Name the components of a balance sheet

Answer 23

Fixed assets
Current assets
Current liabilities
Long term liabilities
Equity