Format and presentation of the balance sheet

Question 1

A group

Answer 1

Refers to the parent entity and all its subsidiaries

○ Often referred to as the economic entity

Question 2

Concept of Parent entity and group

Answer 2

○ A reporting entity can be a single entity (company/partnership) or a collection of entities that operate together

○ Economic entity
- A group of companies produce consolidated financial statement

Question 3

Underlying Principles/Assumptions

Answer 3

• Period Convention
• Monetary Concept
• Cost Principle
• Going concern Assumption

Question 4

Period Convention

Answer 4

○ The life of the organisation is broken up into regular reporting periods (generally at least one year)
- The ‘balance date’ represents the reporting date on which financial statements are prepared

Question 5

Monetary Concept

Answer 5

○ All items are measured in terms of money

○ Items without a monetary value are not captured by the conventional accounting system

Question 6

Cost Principle

Answer 6

○ All items in the financial statements are initially recorded at their cost of acquisition

○ Subsequent to acquisition items can be measured using bases other than cost

Question 7

Going concern Assumption

Answer 7

○ Assume that the organisation will continue in operations

- Impacts on how we measure the items in financial statements