Session 1

Question 1

What is the statement of financial position?

Answer 1

A snapshot of the business in one time, shows a business assets and liabilities

Question 2

What is the definition of a current and non current asset?

Answer 2

Non-Current Assets - Assets that the business will hold for more than one year

Current Assets - Assets which will be held by the business for less than a year

Question 3

What is the Accounting equation?

Answer 3

Assets - Liabilities = Capital

Question 4

What is the definition of current and non current liabilities?

Answer 4

Non current liabilities - Amounts the business owes that are due ti be paid in more than a year

Current liabilities - Amounts the business owes that must be paid within a year

Question 5

What is Capital made up of?

Answer 5

The money the owner has put into the business plus profit less and drawings

Question 6

What is the statement of profit and loss?

Answer 6

Summary of trading activites over a period of time usually 12 months.

Shows income and expenses which gives the profit the business has generated.

Question 7

What is opening and closing inventory?

Answer 7

Opening Inventory - All the goods the business purchased in the last period but didn’t sell.

Closing Inventory - All the goods the business has bought in this period but not yet sold.

Question 8

How does the Profit and Loss account form part of the double entry-bookeeping system?

Answer 8

All Income and expense accounts are emptied and transferred to the P&L account.

Question 9

What is Carriage In and Carriage Out?

Answer 9

Carriage in - Buyer pays the carriage cost of purchases (delivery charge)
Carriage out - Seller pays the carriage charge (free delivery)

Question 10

What is the double entry for Carriage In and Carriage out?

Answer 10

Carriage in:
Debit - Carriage In
Credit - Trade paybales

Carriage out:
Debit - Carriage out
Credit - Bank

Question 11

Who are the primary users of financial statements?

Answer 11

Investors
Lenders
Creditors

Question 12

Name 2 fundamental characterisitcs?

Answer 12

Relevance
Faithful Representation

Question 13

Name 4 Enhancing qualitative characterisitcs?

Answer 13

Comparability - should be able to be compared with previous years
Verifiability - If info can be veriufied means that info is faithully represented
Timeliness - Info should be provided in time to enable decisions
Understandability - Info should be clear and concise and understood by those wanting to use it

Question 14

Name 5 fundamental ethical principles?

Answer 14

Objectivity
Integrity
Confidentiality
Professional competence and due care
Professional Behaviour

Question 15

Name 7 accounting principles

Answer 15

Going concern - Assumption that the business will carry on for 12 months
Accruals
Business entity
Materiality - How important something is
Consistency
Prudence - cautious, aware
Money measurement

Question 16

What does Objectivity mean?

Answer 16

To not allow bias, conflict of interest to override judgement

Question 17

What does integrity mean?

Answer 17

To be honest and upfront and straightforward in professional and business relationships

Question 18

What does professional behavouir mean?

Answer 18

Comply with relevant laws and regulations, avoid any action which may bring the company into dispute

Question 19

What does professional competance and due care mean?

Answer 19

maintain professional knowledge and skill at the level required, act diligently when providing professional services

Question 20

What does materiality mean?

Answer 20

If omitting it or mistating it could influence the decisions that users make on the basis of financial information about a specfic reporting entity.