chapter 2 Flashcards
how to calculate a persons financial position
list assets, list liabilites, total those then subtract total assets with total liabilites
what does it mean when the net wroth is postive and negative
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.
what is a asset and liability
Someone a person owns and that has value(money value)to it and then debt or money owed
Define owner’s equity
Difference between persons assets and liabilities, Owner’s equity is the portion of a company’s assets that an owner can claim
What is another term that means the same as equity
Net worth, capital
What is a balance sheet?
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.
On which side of a balance sheet are the assets listed? The liabilities?
The assets are listed on the left of the balance sheet while the liabilities are on the right.
How is an automobile that is not fully paid for listed on a balance sheet?
The full cost of the automobile is listed as an asset, and the amount owed on the automobiles are listed as a liability.
Give two rules for placing dollar signs on balance sheets.
They are placed on the totals and on the first asset and liability
what is a creditor and where is creditor listed on a balance sheet
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
What is meant by a single ruled line drawn beneath a column of figures balance sheet?
A single ruled line drawn beneath a column of figures means that the column is to be totalled.
When is a double ruled line drawn beneath a total?
It should be under the total assets and liabilities to indicate the final total.
Which is the most liquid asset? Why?
Cash. liquidity is based on how fast an asset can be turned into cash and cash is cash.
In what order are liabilities listed on a balance sheet?
Liabilities are listed on the balance sheet in the order in when they will be paid.
What are accounts receivable and payable?
receivable is they money owed to you by customers, payable is money you owe to someone
In what order are assets listed on a balance sheet?
Order of liquidity.
What term describes any company or person who owes money to the business?
Any company or person who owes money to the business is called a debtor
who gets first claims to assets and liabilites? why?
creditors. they provided funds to acquire the assets (a banker)
they provided the assets themselves (a supplier)
Who benefits from the gains made in closing down a business?
The owner benefits from it.
Who (primarily) suffers from losses incurred in closing down a business?
The owner suffers.
who sets the IFRS
IASB - international accoutning standards board
when did canadian business start using IFRS
jan 1st, 2011
ASPE
accounting standards for private enterprises
Explain the business entity concept.
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
