Week 2 - Statement of Financial Position

Question 1

What is the Statement of Financial Position (3)

Answer 1

• the Accumulated Wealth of the Business and what Form does it Take
• Lists the Assets, Liabilities and Equity of Org
• Snapshot of the Financial Condition of a Business as of a Specific Date

Question 2

State the Basic Accounting Equation

Answer 2

Assets = Liability + Equity

Question 3

3 Characteristics of Assets

Answer 3

• Resources a Business Owns or Controls
• Provides Future Services of Benefits
• Cash, Inventory, Equipment, Trade Recieveable etc

Question 4

3 Characteristics of Liabilities

Answer 4

• Claims Against Assets (debts & obligations)
• Creditors (party to whom money is owned)
• Trade Payable, Notes Payable, Salaries and Wages Payable

Question 5

4 Characteristics of Equity :

Answer 5

• Ownership Claim on Total Assets
• Referred to as Residual Equity
• E.g. Ordinary Share Capital and Retained Earnings (Retained Profit)
• Net Worth of Business

Question 6

What are the 2 Effects on the Accounting Equation Everytime there’s an Event or 2 Transaction within the Business

Answer 6

• MONETARY UNIT - include the Accounting Records only Transaction Data that can be Expressed in Terms of Money
• ECONOMIC ENTITY - requires that Activities of the Entity can be Kept Separate and the Distinct from the Activities of its Owner and All Other Economic Entities