ELEMENTS of Balance Sheet

Question 1

Elements of financial statements

Answer 1

the general groupings of the line items contained within the statements

Question 2

Financial statements

Answer 2

portray the financial effects of transactions and other events grouping them into broad classes according to their economic characterististics

Question 3

ASSETS

Answer 3

resources controlled by the enterprise as a result of past transactions and events from which future economic benefits are expected to flow to the enterprise

Question 4

Current Assets

Answer 4

refers to all assets that are expected to be sold or consumed within the normal operating cycle of the business

Question 5

Cash

Answer 5

includes money or its equivalent that is readily available for unrestricted use.

Question 6

Accounts Receivable

Answer 6

these are amounts collectible arising from services rendered to a customer or client on credit or sale of goods to customers on accounts. This constitutes an oral or verbal promise to pay by a customer

Question 7

Allowance for bad debts

Answer 7

this is a contra-asset account. It provides for possible losses from uncollected accounts.

Question 8

Notes Receivable

Answer 8

receivables supported by written or formal promise to pay in the form of a promissory note.

Question 9

Prepaid Expense

Answer 9

account title for expenses that are paid in advance but are not yet incurred or have not yet expired such as Prepaid Rent, Prepaid Insurance, Prepaid Supplies, etc.

Question 10

Non Current Assets

Answer 10

“tangible assets which are held by an enterprise for use in production or supply of goods and services, for rental to others, or administrative purposes, and which are expected to be used during more than one period” (International Accounting Standards

Question 11

Land

Answer 11

the site where the building used as office or store is constructed.

Question 12

Building

Answer 12

a finished construction owned by the business where operations and transactions took place

Question 13

Equipment

Answer 13

various assets such as machinery, transportation equipment, office equipment, delivery equipment, and store equipment.

Question 14

Accumulated Depreciation

Answer 14

this is a contra-asset account. This is a Valuation Account which is shown as a deduction from property and equipment.

Question 15

Intangible Assets

Answer 15

these are identifiable, non-monetary assets without physical substance held for use in production or supply of goods or services.

Question 16

Liabilities

Answer 16

these are present obligations of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits

Question 17

Current Liabilities

Answer 17

financial obligations of the enterprise advance which are expected to be settled in the normal operating cycle which is within one (1) year

Question 18

Accounts Payable

Answer 18

obligations supported by oral or verbal promise to pay

Question 19

Salaries Payable

Answer 19

salaries earned by employees but not yet paid.

Question 20

Utilities Payable

Answer 20

utilities already consumed but not yet paid

Question 21

Unearned Income

Answer 21

cash collected or received in but services have not yet been rendered.

Question 22

Non-Current Liabilities

Answer 22

these are financial obligations of the enterprise which are expected to be settled for more than a year.

Question 23

Notes Payable

Answer 23

obligations supported by written or formal promise to pay by the debtor (enterprise) evidenced by a promissory note.

Question 24

Mortgage Payable

Answer 24

a financial obligation of the enterprise which requires a fixed or tangible property to be pledged as collateral to ensure payment.

Question 25

Owner’s Equity

Answer 25

net worth or net assets of the enterprise

Question 26

Owner’s Capital

Answer 26

is the residual interest in the assets of the enterprise after deducting all its liabilities.

Question 27

Owner’s Drawing

Answer 27

this is the account used for the temporary withdrawals from the capital balance and then to be closed at the year-end to the capital account.