Question 1

A Balance Sheet shows that a business is funded by:
A Capital introduced by the owner
B Money borrowed from outsiders
C Retained profits from the current and prior years
D All of the above

D

Accepted Answer

A balance sheet shows the financial position of a business at a particular point in time. It includes assets, liabilities, and equity. Assets are what the business owns, while liabilities are what it owes to others. Equity reflects the owners' stake in the business. This can come from capital introduced by the owner, money borrowed from outsiders, and retained profits from the current and prior years. Therefore, the correct answer is D, all of the above.

Question 2

What is a firm's balance date?&#10;A The date the business was formed&#10;B Any day when all the firm's accounts are in balance&#10;C The first day of the business's financial year&#10;D The last day of the business's financial year&#10;E The day the business is wound up

Accepted Answer

A firm's balance date is the last day of the business's financial year, also known as the reporting period. This is when the company prepares its financial statements and reports its financial performance and position. It is important for the firm to choose a balance date that suits its business operations and reporting requirements.

Question 3

What names are acceptable for the statement describing financial position?
A Statement of Assets,Liabilities and Equity
B Balance Sheet
C Financial Position Statement
D NZ IAS 1 recommends Statement of Financial Position but allows for alternative names to be used

D

Accepted Answer

While all of the choices are acceptable, D is the best answer because it accurately reflects the recommendation of NZ IAS 1 while also acknowledging that alternative names may be used.

Question 4

A patent would most accurately be classified on the Balance Sheet under:&#10;A Current assets&#10;B Financial assets (investments)&#10;C Intangible assets&#10;D Non-current assets

Accepted Answer

A patent is an intangible asset that a company holds as a result of research and development efforts. Since patents have no physical existence, they belong to the category of intangible assets, which companies report on the balance sheet.

Question 5

From the following partial trial balance,produce a Balance Sheet:&#10;

Accepted Answer

The answer of From the following partial trial balance,produce a...

Question 6

Assets on the Balance Sheet may be valued at:&#10;A Historical cost&#10;B Current cost&#10;C Net realisable value&#10;D Any of the above

Accepted Answer

Assets on the Balance Sheet may be valued at historical cost, current cost or net realisable value, depending on the accounting policy of the company. The choice of valuation method may depend on a number of factors including the type of asset, industry norms, regulatory requirements, and management's judgement. Each method has its pros and cons, and the choice of method may have a significant impact on the reported financial results of the company. Therefore, the best choice is to use any of the above methods depending on the circumstances.

Question 7

Explain the difference between current and non-current assets.

Accepted Answer

The answer of Explain the difference between current and non-current...

Question 8

A 'T' format for the Balance Sheet shows:
A The assets section alongside liabilities and owner's equity
B The assets section above liabilities and owner's equity
C The liabilities section above assets and owner's equity
D The owner's equity section above liabilities and assets

Accepted Answer

The 'T' format for the balance sheet shows the assets section alongside the liabilities and owner's equity. This makes it easy to compare the amounts of assets with the amounts of liabilities and owner's equity, and helps to provide a clear picture of the financial health of the organization.

Question 9

The Owner's equity section of a sole trader's Balance Sheet (assuming that a Statement of Changes in Equity is not used)would consist of:
A Share capital,asset revaluation reserves and retained earnings
B Capital invested,plus net profits,less drawings
C A combination of A and B
D None of the above

Accepted Answer

As a sole trader, there are no share capital or asset revaluation reserves as there are no other shareholders. Therefore, the owner's equity section would only include the capital invested by the owner, plus any net profits earned over time, less any drawings taken out by the owner. This is commonly referred to as the "owner's capital" section and represents the portion of the business that the owner owns outright.

Question 10

The accounting equation can be expressed on the Balance Sheet as
A Assets = Liabilities x Owner's equity
B Assets = Liabilities - Owner's equity
C Assets = Liabilities + Owner's equity
D Assets = Liabilities ÷ Owner's equity

Accepted Answer

The accounting equation states that Assets (what a company owns) is equal to Liabilities (what a company owes) plus Owner's Equity (what is left over for the owner after liabilities are paid off). Therefore, the correct expression on the balance sheet would be Assets = Liabilities + Owner's Equity.

Question 11

The Balance Sheet can be used as:&#10;A A statement to determine the business's solvency&#10;B A statement to determine the business's economic potential&#10;C A statement of accountability&#10;D All of the above

Accepted Answer

The answer of The Balance Sheet can be used as:&#10;A...

Question 12

From the following partial trial balance,produce a Balance Sheet:&#10;

Accepted Answer

The answer of From the following partial trial balance,produce a...

Question 13

Shares in Telecom would most accurately be classified on the Balance Sheet under:&#10;A Current assets&#10;B Financial assets (investments)&#10;C Intangible assets&#10;D Non-current assets

Accepted Answer

The answer of Shares in Telecom would most accurately be...

Question 14

From the following partial trial balance,prepare a Balance Sheet (Statement of Financial Position):&#10;

Accepted Answer

The answer of From the following partial trial balance,prepare a...

Deck 5: The Balance Sheet Statement of Financial Position