Week 2

Question 1

What is the purpose of the Balance Sheet?

Answer 1

The purpose of the Balance Sheet is to set out the financial position of a business at a particular point in time

Question 2

What are the main characteristics of an asset?

Answer 2

A probable future economic benefit.
The business has exclusive right to control the benefit.
The benefit must arise from some past transaction or event.
The asset must be capable of reliable measurement in monetary terms.

Question 3

True or False. Only three of the following four asset characteristics need to be met for something to be deemed an asset:

A probable future economic benefit.
The business has exclusive right to control the benefit.
The benefit must arise from some past transaction or event.
The asset must be capable of reliable measurement in monetary terms.

Answer 3

False

Question 4

True or False. An asset can be Tangible.

Answer 4

True.

Question 5

True or False. An asset cannot be Tangible.

Answer 5

False.

Question 6

True or False. An asset can be Intangible.

Answer 6

True.

Question 7

True or False. An asset cannot be Intangible.

Answer 7

False.

Question 8

What is a Tangible asset?

Answer 8

A physical substance, for example Land.

Question 9

True or False. A provision is a type of Liability.

Answer 9

True

Question 10

True or False. A provision is a type of Asset.

Answer 10

False

Question 11

An estimated liability is also known as A:

Answer 11

Provision

Question 12

Income tax, long-service leave and warranties are examples of what type of liability?

Answer 12

Provision

Question 13

A resource held by a business which has certain characteristics is an:

Answer 13

Asset

Question 14

True or False: ‘A probable future economic benefit’ is a characteristic of an asset.

Answer 14

True.

Question 15

True or False: ‘The business has an exclusive right to control the benefit’ is a characteristic of an asset.

Answer 15

True.

Question 16

True or False: ‘The benefit must arise from some past transaction or event’ is a characteristic of an asset.

Answer 16

True.

Question 17

True or False: ‘The asset must be capable of reliable measurement in monetary terms’ is a characteristic of an asset.

Answer 17

True.

Question 18

True or False: ‘A probable future economic benefit’ is not a characteristic of an asset.

Answer 18

False.

Question 19

True or False: ‘The business has an exclusive right to control the benefit’ is not a characteristic of an asset.

Answer 19

False.

Question 20

True or False: ‘The benefit must arise from some past transaction or event’ is not a characteristic of an asset.

Answer 20

False.

Question 21

True or False: ‘The asset must be capable of reliable measurement in monetary terms’ is not a characteristic of an asset.

Answer 21

False

Question 22

True or False: ‘Producing Profit’ is a characteristic of an asset.

Answer 22

False.

Question 23

What are the four characteristics of an asset?

Answer 23

• A probable future economic benefit
• The business has an exclusive right to control the benefit
• The benefit must arise from some past transaction or event.
• The asset must be capable of reliable measurement in monetary terms.

Question 24

Would an obsolete piece of equipment that can be sold for scrap be considered an asset?

Answer 24

Yes.

Question 25

Would an obsolete piece of equipment that cannot be sold for scrap be considered an asset?

Answer 25

No.

Question 26

True or False. Even though the business does not have exclusive rights to something, it can still be considered an asset.

Answer 26

False.

Question 27

If a business agrees to purchase a piece of machinery in the future, can it currently be counted as an asset?

Answer 27

No.

Question 28

Can customer loyalty be counted as an asset on the statement of financial position?

Answer 28

No.

Question 29

Can the title of a magazine such as ‘Top Gear’ or ‘New Idea’ be counted as an asset on the statement of financial position?

Answer 29

No.

Question 30

What type of asset is this? ‘Those assets that have physical substance (e.g. plant and machinery, motor vehicles)’

Answer 30

Tangible Assets.

Question 31

What type of asset is this? ‘Assets which, while providing expected future benefits, have no physical substance (e.g. copyrights, patents)’

Answer 31

Intangible Assets

Question 32

What is being described? ‘An obligation on the part of the business to provide cash or some other benefit to an outside party.’

Answer 32

A claim

Question 33

Do all four of the assets characteristics listed below need to apply for something to be considered an asset?

• A probable future economic benefit
• The business has an exclusive right to control the benefit
• The benefit must arise from some past transaction or event.
• The asset must be capable of reliable measurement in monetary terms.

Answer 33

Yes

Question 34

If a business utilises a publicly owned canal to produce revenue, can it be counted as an asset on the statement of financial position? Why / Why not.

Answer 34

No. Because the business does not have exclusive right to control the canal.

Question 35

Assets that have a real, physical substance are referred to as:

Answer 35

Tangible Assets.

Question 36

Assets that have no physical substance but still represent potential benefits are referred to as:

Answer 36

Intangible Assets.

Question 37

True or False. Equity can be defined as the ‘residual interest in the assets of the entity after deducting all of its liabilities’

Answer 37

True

Question 38

What is being described?

‘Increases the owners’ claim as a result of operations’.

Answer 38

Revenues

Question 39

What are Gains from non-operating activities called?

Answer 39

Other Gains.

Question 40

What is the primary purpose of a business?

Answer 40

Generating Wealth.

Question 41

Who use the term ‘profit and loss account’?

Answer 41

Accountants

Question 42

What is being described?

‘Increase in economic benefits for the accounting period in the form of inflows of assets or decreases in liabilities that result in increases in equity, other than those relating to ownership contributions’.

Answer 42

Income