The Statement of Financial Position (SFP)

Question 1

What 2 elements are covered in IAS1?

Answer 1

1. The purpose of financial statements
2. The differing financial statements

Question 2

What does a complete set of financial statements per IAS1 comprise of?

5 elements

Answer 2

1. statement of profit or loss and other comprehensive income
2. statement of financial position
3. statement of changes in equity
4. statement of cash flows
5. notes to the financial statements

Question 3

What 5 elements are crucial when displaying a companies financial information?

Answer 3

1. Name of the entity
2. If the financial statements are for a single company or a group
3. The accounting period end date
4. The currency
5. The rounding levels i.e £’000

Question 4

What does IAS1 state about presenting fairly?

Answer 4

‘Financial statements shall present fairly the financial position, financial performance, and cash flows of an entity.’

Question 5

If the preparation and presentation of financial statements complies with the accounting standards and is within the conceptual framework, then the financial statements will be?

Answer 5

presented fairly

Question 6

List the 5 fundamental accounting concepts that IAS1 requires compliance with?

Answer 6

1) accruals concept
2) going concern concept
3) consistency - classification from one period to the next
4) offsetting - assets and liabilities should not be offset unless required of permitted by the relevant standard.
5) materiality and aggregation - each material class of similar items should be presented separately in the financial statements.

Question 7

What requirements is there in the disclosure of shares in the financial statements?

4 elements

Answer 7

1. number of shares authorised
2. number of shares issued and paid for
3. nominal value of the share
4. class of the share

Question 8

Give an example of 2 types of reserves you would find in the Equity section?

Answer 8

1. Revaluation surplus
2. Retained earnings

Question 9

What is a revaluation reserve?

Answer 9

It arises if you revalue an asset. It is a non-distributable reserve, and it serves a particular purpose and is used when we increase the value of a non-current asset.

Question 10

What are retained earnings?

Answer 10

Accumulation of profits and losses made over the years after deducting any dividends, so the balance of undistributed profits. Any distribution of profit to the owners will be deducted.

Question 11

What are dividends never?

Answer 11

An expense

Question 12

How are dividends treated?

Answer 12

As a reduction in retained earnings

Question 13

What are the two stages dividend can be paid?

Answer 13

1. Interim (mid-year)
2. Final (end of year)

Question 14

Which accounting period should dividends be included in?

Answer 14

The accounting period they have been approved by directors in

Question 15

What needs to be disclosed with dividends?

3 things

Answer 15

1. the nature and purpose of each reserve
2. reconciliation between b/f and c/y amounts
3. proposed dividends which have not been approved by year end and the date of declaration and amount

Question 16

What are the steps for drafting the SFP?

Answer 16

1. Review the proforma
2. Workings
3. Enter the figures
4. Post the double entries
5. Complete the workings