Financial Position

Question 1

It is a formal statement showing the three elements comprising financial position, namely assets, liabilities and equity.

Answer 1

Statement of financial position

Question 2

It is the ability of the entity to meet currently maturing obligations.

Answer 2

Liquidity

Question 3

It is the availability of cash over the longer term to meet maturing obligations.

Answer 3

Solvency

Question 4

PAS 1, paragraph 60, provides that an entity shall present current and noncurrent assets, and current and noncurrent liabilities, as separate classifications in the statement of financial position. True or False.

Answer 4

True.

Question 5

A present economic resource controlled by the entity as a result of past events.

Answer 5

Asset

Question 6

It is a right that has the potential to produce economic benefits.

Answer 6

Economic resource

Question 7

What are the three essential characteristics of an asset?

Answer 7

a. Asset is controlled by the entity
b. Asset is the result of a past event
c. Asset has the potential to produce economic benefits

Question 9

When an entity shall classify an asset as current?

Answer 9

a. The asset is cash or cash equivalent
b. Entity holds the asset primarily for the purpose of trading
c. The asset is expected to realize within 12 months
d. Entity expects to realize the asset or intends to sell or consume it within the entity’s NOC

Question 10

These are short-term, highly liquid investments that are readily convertible into known amount of cash and which are subject to an insignificant risk of changes in value.

Answer 10

Cash equivalents

Question 11

Why equity securities cannot qualify as cash equivalent?

Answer 11

Because shares do not have a maturity

Question 12

What can qualify as cash equivalents?

Answer 12

preference shares with specified redemption date and is acquired three months before redemption date

Question 13

It is the time between the acquisition of assets for processing and their realization in cash or cash equivalents.

Answer 13

Operating cycle of an entity

Question 14

Current assets are usually listed in the SFP in the …

Answer 14

order of liquidity

Question 15

PAS 2, paragraph 54, provides that as a minimum the line items under current assets are:

Answer 15

1. Cash and cash equivalents
2. Financial assets at fair value through profit or loss
3. Trade and other receivables
4. Inventories
5. Prepaid expenses

Question 16

Noncurrent assets includes what?

Answer 16

1. Property, plant and equipment
2. Long-term investment
3. Intangible assets
4. Other noncurrent assets