Chapter 3 - Elements Of FS

Question 1

What is the accounting equation?

Answer 1

Total assets = Total liabilities + Total equity

Question 2

Name the category that the following element belongs to:

Fixtures & fittings

Answer 2

Non-current asset

Question 3

Name the category that the following element belongs to:

Furniture

Answer 3

Non-current asset

Question 4

Name the category that the following element belongs to:

Trade receivables

Answer 4

Current asset

Question 5

Name the category that the following element belongs to:

Inventory

Answer 5

Current asset

Question 6

How would a furniture shop record its tables and chairs for sale?

Answer 6

Inventory

Question 7

Name the category that the following element belongs to:

Cash at bank

Answer 7

Current asset

Question 8

Name the category that the following element belongs to:

Prepaid expense

Answer 8

Current asset

Question 9

Name the category that the following element belongs to:

Property

Answer 9

Non current asset

Question 10

Name the category that the following element belongs to:

Accrued expense

Answer 10

Current liability

Question 11

Name the category that the following element belongs to:

Trade payables

Answer 11

Current liability

Question 12

Name the category that the following element belongs to:

Discount received

Answer 12

Income

Question 13

Name the category that the following element belongs to:

Long term borrowing

Answer 13

Non current liability

Question 14

Name the category that the following element belongs to:

Bank overdraft

Answer 14

Current liability

Question 15

Define an asset.

Answer 15

Resources owned or controlled by the business to carry out its business activities.
Expected to generate future benefits.

Question 16

Define liabilities.

Answer 16

Amounts that the business owes to other businesses or people.

Question 17

How is an asset different from an expense?

Answer 17

The classification depends on the benefits that can be enjoyed by the business. Benefits from assets will last longer than benefits from expenses.

Question 18

What is the expanded accounting equation for a sole proprietorship?

Answer 18

Total assets = Total liabilities + Capital + Income - Expenses - Drawings