elements of financial statements and the accounting equation

Question 1

examples of trading business

Answer 1

supermarkets, fruit stalls

Question 2

examples of service business

Answer 2

hairdresser, laundry shop

Question 3

trading business vs service business differences

Answer 3

t: buys goods from supplier and sells goods to customers
while s: provides services to customers

t: there is a trading portion in the statement of financial perf
while s: there is no trading portion in the statement of financial performance

t: inventory is included in the statement of financial pos
while s: there is no inventory in the statement of financial position

Question 4

difference between cash and credit transactions

Answer 4

cash: payment made immediately
credit: payment postponed

Question 5

assets

Answer 5

resources that a business owns or controls that are expected to provide future benefits

Question 6

liabilities

Answer 6

obligations owed by a business to others that are expected to be settled in the future

Question 7

equity

Answer 7

refers to the claim by owner on the net assets of business

Question 8

equity=

Answer 8

capital + profit - drawings

Question 9

income

Answer 9

refers to the amounts earned from the activities of the business

Question 10

expenses

Answer 10

costs incurred to earn income in the same accounting period

Question 11

basic accounting equation

Answer 11

assets = liabilities + equity

Question 12

expanded accounting equation

Answer 12

assets = liabilities + (capital + (income-expenses) - drawings)