Chp 1 : Entities and financial reporting statements

Question 1

What is stewardship accounting?

Answer 1

Stewards were employed by wealthy individuals to keep ‘a count’ of items they owned (assets) and items owed (liabilities).

Question 2

What is a statement of financial position?

Answer 2

It provides information on what entity owns (assets) and what the entity owes (liabilities)

Question 3

What does the difference between assets and liabilities represent?

Answer 3

‘equity capital’ being the amount that the company owes the owners, or known as the amount the owners have invested in the company either directly or indirectly.

Question 4

What is a statement of profit or loss?

Answer 4

• this statement outlines the income for the period and the expenses incurred in the period.
• The difference between income and expenses is profit or loss for the period.

Question 5

What is a statement of cash flow?

Answer 5

Shows an entity’s financial adaptability. An entity’s financial adaptability is its ability to take effective action to alter the amount and timing of its cash flows so it can respond to unexpected changes or opportunities.

Question 6

What is a bookkeeping system?

Answer 6

This consists of maintaining a record of the and monetary value of the transactions of an entity, usually in books of account (accounting records)

Question 7

What should accounting systems keep record of?

Answer 7

Money received:
- For What
- For Whom

Money Paid:
- For What
- To whom

Liabilities:
- Loans
- For goods (Trade payables)
- For expenses ( accruals)

Assets:
- Buildings, vehicles, fixtures and fittings etc.
- Amounts due from customers (receivables)
- Expenses paid in advance (prepayments)

Question 8

What is Double-entry bookkeeping

Answer 8

is generally regarded as the most accurate method of bookkeeping, primarily because each transaction is entered in the books twice.

Question 9

What is the duplication in double-entry bookkeeping considered to be?

Answer 9

a form of internal check , highlights any errors.

Question 10

Summary of statement of financial position?

Answer 10

• The amount of cash and money at the bank
• Other assets that the business owns , such as goods for resale (inventory), vehicles or machinery
• Trade receivables and trade payables
• The amount of capital invested in the business by its owner(s)
• Any money that has been borrowed by the business

Question 11

Summary of statement of financial performance?

Answer 11

• Revenue from operating activities
• Expenses from operating activities
• Profit or loss in the period from operating activities
• Other income or expenses
• Total comprehensive income,

Question 12

What is stewardship objective?

Answer 12

is one of the objectives of current day financial statements. It states that financial statements should provide information that is useful for assessing management’s stewardship function.

Question 13

What is accountability?

Answer 13

refers to management’s responsibility to provide an account/report on the way in which the resources entrusted to them have been used.

Question 14

What is economic decision-making?

Answer 14

the efficient and effective allocation of resources

Question 15

What is the regulatory framework of accounting?

Answer 15

is a general term used to describe the legislation and other rules that govern the content and format of company financial statements.