Investing and Financing Decisions and the Accounting System

Question 1

What is the going concern convention

Answer 1

Financial statement prepared on basis that operations will continue as normal for the foreseeable future.

Question 2

What is the separate equity assumption convention

Answer 2

the business and its owners are treated as seperate entities

Question 3

What is the historical cost convention

Answer 3

Business resources to be reflected at their acquisition cost

Question 4

What is the monetary unit assumption

Answer 4

accounting info should be measured and reported in the national monetary unit without adjustment for purchasing power

Question 5

What is a classified SoFP

Answer 5

where assets and liabilities are classified into CURRENT and NON-CURRENT

Question 6

What is the equation for current ratio

Answer 6

Current Assets / Current Liabilities

Question 7

Give some examples of CURRENT assets

Answer 7

Cash, accounts receivables and inventory

Question 8

Give some examples of CURRENT liabilities

Answer 8

notes and accounts payable, dividends yet to be paid

Question 9

Give some examples of NON-CURRENT assets

Answer 9

Land, equipment and long term investments

Question 10

Give some examples of NON-CURRENT liabilities

Answer 10

long term lease obligations, long term loans