Introduction to Conceptual Framework and Main Elements of Financial Statements (Week 2)

Question 1

Statement of Financial Position (SoFP)

Answer 1

List of Assets and Liabilities owed by the company over a period of time

Question 2

Statement of Profit or Loss (IS)

Answer 2

A record of income generated and expenses incurred over a period of time

Question 3

What is an Asset?

Answer 3

Something that has value and the company owns

Question 4

What is a Liability?

Answer 4

Something that the company owes to somebody else

Question 5

What is Revenue?

Answer 5

Income generated by the business

Question 6

What is Expenses?

Answer 6

Costs of running the business

Question 7

What is Capital/ Equity?

Answer 7

The residual interest in the assets of the company after deducting all its liabilities

Question 8

The Matching Principle

Answer 8

Costs should be set against the revenue which they generate at the point in time when this arises

Question 9

The Accrual Concept

Answer 9

Revenue and costs must be recognised as they are earned or incurred, not as money is received or earned