chapter 5

Question 1

what is the purpose of trial balance?

Answer 1

1. facilitate the preparation of financial statement
2. ensure there is no mathematical errors in recording

Question 2

what is the going concern theory?

Answer 2

A business is assumed to have indefinite life unless there is credible evidence that it may close down.

Question 3

what is the accounting period theory?

Answer 3

The life of a business is divided into regular time intervals.

Question 4

what is the purpose of financial performance?

Answer 4

it shows the income earned and expenses incurred for a period of time and informs stakeholders of profitability of a business.

Question 5

what is the purpose of financial position?

Answer 5

provides information on how resources are obtained and used in business and the claim by owner on net assets of business at a point in time.

Question 6

what is the limitation of trial balance?

Answer 6

when a trial balance is not balanced, there are errors. even if its balanced, there may be errors not revealed by trial balance.