FR- Financial Reporting and Disclosures

Question 1

How do you determine which assets/liabilities are classified as current on the statement of financial position?

Answer 1

Those expected to be converted to cash, or settled within one year (or operating cycle).

Question 2

Apart from cash, list three other types of assets to be reported on the statement of financial position.

Answer 2

Inventory, Prepaid expenses, Account receivable, Property, plant & equipment

Question 3

List three types of liabilities to be reported on the statement of financial position

Answer 3

Accounts payable, Deferred revenue, bank indebtedness/loan, mortgage payable

Question 4

What is equity?

Answer 4

The residual interest of the entity’s assets after deducting liabilities.

Question 5

Why is a statement of financial position important for users?

Answer 5

1. Helps the company to know whether the company has enough assets to pay off liabilities as they become due
2. Tells the user the amount of liabilities the company holds compared to equity.
3. If there are enough resources to make a distribution to owners