Week 1

Question 1

What is the accounting equation

Answer 1

Assets = Liabilities + Equity

Question 2

Draw the skeleton of statement of PnL

Answer 2

Statement of PnL for period ended date

Revenue
Cost of sales
Gross profit
Operating expenses
Operating profit
Finance costs
Profit before tax
Tax expenses
Net profit

Question 3

Draw the skeleton of the balance sheet (statement of financial position)

Answer 3

Statement of Financial position as at date

Current Assets
Non-current assets
Total assets
Equity
Current Liabilities
Non-current liabilities
Total Equity and Liabilities

Question 4

What does accruals basis accounting mean?

Answer 4

It means that revenue is recorded as it is earned and expenses are recorded as they are incurred, it follows the matching principle

Question 5

What is the matching principle?

Answer 5

Revenue, and all expenses incurred in order to generate that revenue, need to be recognised in the same accounting period.