chapter 2

Question 1

how to calculate a persons financial position

Answer 1

list assets, list liabilites, total those then subtract total assets with total liabilites

Question 2

what does it mean when the net wroth is postive and negative

Answer 2

if positive then the person is in a good financial position and has more assets than debt. if negative, the person has more debt than assets, indicating financial stress.

Question 3

what is a asset and liability

Answer 3

Someone a person owns and that has value(money value)to it and then debt or money owed

Question 4

Define owner’s equity

Answer 4

Difference between persons assets and liabilities, Owner’s equity is the portion of a company’s assets that an owner can claim

Question 5

What is another term that means the same as equity

Answer 5

Net worth, capital

Question 6

What is a balance sheet?

Answer 6

The term balance sheet refers to a financial statement that reports a company’s assets, liabilities, and shareholder equity at a specific point in time.

Question 7

On which side of a balance sheet are the assets listed? The liabilities?

Answer 7

The assets are listed on the left of the balance sheet while the liabilities are on the right.

Question 8

How is an automobile that is not fully paid for listed on a balance sheet?

Answer 8

The full cost of the automobile is listed as an asset, and the amount owed on the automobiles are listed as a liability.

Question 8

Give two rules for placing dollar signs on balance sheets.

Answer 8

They are placed on the totals and on the first asset and liability

Question 9

what is a creditor and where is creditor listed on a balance sheet

Answer 9

Creditors are individuals/businesses that have lent funds to another company and are therefore owed money. the creditor is listed on the right of the balance sheet

Question 10

What is meant by a single ruled line drawn beneath a column of figures balance sheet?

Answer 10

A single ruled line drawn beneath a column of figures means that the column is to be totalled.

Question 11

When is a double ruled line drawn beneath a total?

Answer 11

It should be under the total assets and liabilities to indicate the final total.

Question 12

Which is the most liquid asset? Why?

Answer 12

Cash. liquidity is based on how fast an asset can be turned into cash and cash is cash.

Question 13

In what order are liabilities listed on a balance sheet?

Answer 13

Liabilities are listed on the balance sheet in the order in when they will be paid.

Question 14

What are accounts receivable and payable?

Answer 14

receivable is they money owed to you by customers, payable is money you owe to someone

Question 15

In what order are assets listed on a balance sheet?

Answer 15

Order of liquidity.

Question 16

What term describes any company or person who owes money to the business?

Answer 16

Any company or person who owes money to the business is called a debtor

Question 17

who gets first claims to assets and liabilites? why?

Answer 17

creditors. they provided funds to acquire the assets (a banker)
they provided the assets themselves (a supplier)

Question 18

Who benefits from the gains made in closing down a business?

Answer 18

The owner benefits from it.

Question 19

Who (primarily) suffers from losses incurred in closing down a business?

Answer 19

The owner suffers.

Question 20

who sets the IFRS

Answer 20

IASB - international accoutning standards board

Question 21

when did canadian business start using IFRS

Answer 21

jan 1st, 2011

Question 22

ASPE

Answer 22

accounting standards for private enterprises

Question 23

Explain the business entity concept.

Answer 23

It keeps personal affairs away from business affairs, so someones house is their personal asset not the business asset therefore this principle is to keep those two separate. Accounting for a business should be kept separate from accounting for the owner

Question 24

What is the cost principle?

Answer 24

The cost principle states that the balance sheet must have list the prices of assets as their historic cost price

Question 24

How does the counting concern concept relate to the cost principle?

Answer 24

The concept assumes your business will keep running instead of selling everything the next day. Assets should be listed with their cost price because it is assumed that the company will use it up and does not need to sell it.

Question 25

What IFRS procedure gives a new perspective on the cost principle? Explain

Answer 25

In simple terms, while the cost principle keeps assets recorded at their purchase price, the revaluation model under IFRS allows for updating the asset’s value to reflect current market conditions, offering a more accurate view of its current worth.

Question 26

What is a current asset?

Answer 26

It is assets that can be turned into cash in a years time or asset used up in a year, Accounts receivable, supplies

Question 27

What is a current liability?

Answer 27

It is liabilities that will be paid/due in a years time. accounts payable

Question 28

Cash must always be the first asset listed on the balance sheet. Comment on this statement

Answer 28

Assets should be listed in order of liquidity and cash is the most liquid you can get.
Though, some countries use a different format and list the long term assets before.

Question 29

What is the name of the balance sheet under IFRS?

Answer 29

Statement of financial position