Question 1

The statement of profit or loss and other comprehensive income answers which question?

Accepted Answer

The statement of profit or loss and other comprehensive income shows the revenue, expenses, and resulting profit (or loss) of the business. It also includes other comprehensive income, such as gains or losses from changes in the value of assets, which is important for understanding the overall financial performance of the business.

Question 2

When Donna prepares her company's statement of financial position, she should include ___________ in the list of current assets.

Accepted Answer

Trade receivables are accounts receivable that are owed to the company by its customers and are expected to be collected within one year. Current assets are assets that are expected to be converted into cash or used up within a year, and trade receivables fit this definition. Equipment, land, and leased property are considered long-term assets and would not be included in the list of current assets.

Question 3

Candace purchased a car for her company's exclusive use.The value of this car:

Accepted Answer

The value of a car decreases over time due to wear and tear, depreciation, and market changes. As time passes, the car will be worth less than what it was originally worth when Candace purchased it.

Question 4

Buildings and machinery are considered to be:

Accepted Answer

Buildings and machinery are long-term assets and are used in the business for a long period of time, so they are classified as non-current assets.

Question 5

Martina invested her savings into her business when she started it.Later she added more capital and she has kept some of her profits.Together these are known as:

Accepted Answer

The investments made by Martina, both her savings and additional capital, as well as the profits she has retained, are considered equity in her business. Equity represents the owner's stake in the business and can include various sources of investment or retained earnings. Therefore, option D is the correct choice. Options A, B, and C are not accurate descriptions of Martina's investment in her business.

Question 6

For investment purposes, Wilma needs a snapshot of the business's financial position at a specific point in time.She should look at the:

Accepted Answer

The statement of financial position, also known as the balance sheet, provides a snapshot of the business's financial position at a specific point in time by showing its assets, liabilities, and equity. This information is vital for making investment decisions as it shows the company's financial health and its ability to meet its financial obligations. The marketing plan, statement of cash flows, and statement of profit and loss are important as well but do not provide the same level of insight into the financial position of the business at a specific point in time.

Question 7

A two-year old asset has a depreciable life of 10 years.Its initial purchase cost was R450 000 and it is depreciated by 10 per cent annually.What is the remaining depreciable value of the asset?

Accepted Answer

The asset depreciates by 10% annually, so after two years, it has depreciated by 20% of its initial cost. 20% of R450,000 is R90,000. The remaining depreciable value is R450,000 - R90,000 = R360,000.

Question 8

For Winston to understand how his company performed during calendar year 2016, he must begin with the business's financial position on:

Accepted Answer

The beginning of the calendar year is a logical starting point to assess the financial performance for the entire year. It allows Winston to analyze the financial statements for the year, calculate financial ratios, and compare them with industry averages or previous year’s performance. Therefore, the financial position on 01 January, 2016, is the best choice for Winston to begin his analysis.

Question 9

The items on the statement of profit or loss and other comprehensive income are expressed in rands but the corresponding margins are expressed as:

Accepted Answer

The corresponding margins are expressed as percentages, representing the percentage of revenue that is profit or the percentage by which expenses exceed revenue. This allows for easier comparison and analysis of financial performance.

Question 10

The debts that Rhonda's company will repay within the next ______________ are considered to be current liabilities.

Accepted Answer

Current liabilities are debts that are expected to be repaid within a short period of time, usually within 12 months. Therefore, the best choice is D, 12 months. The other options are also relatively short periods, but not as commonly used as 12 months for defining current liabilities.

Question 11

Some assets don't seem to fit neatly into any category so accountants created a category called 'other'.Which asset would be considered an 'other' asset?

Accepted Answer

Goodwill is considered an 'other' asset because it is an intangible asset that doesn't fit into traditional categories like physical assets (land, machinery) or financial reserves (contingency funds).

Question 12

Ronnie needed an expensive piece of equipment to expand his business.He borrowed the money from the bank and pledged the equipment as ___________.If Ronnie does not repay the loan, the bank can take his equipment.

Accepted Answer

Collateral is an asset or property that a borrower pledges as security for a loan. In this case, Ronnie pledged his expensive equipment as collateral to the bank to secure his loan. If he fails to repay the loan, the bank can take possession of the equipment to recover their money. A promissory note is a written promise to repay a debt, long-term debt refers to a type of borrowing that is paid back over a period of more than one year, and an asset in escrow refers to funds held by a third party until conditions are met. None of these options accurately describe Ronnie's situation.

Question 13

XYC Corporation pays its taxes quarterly but withholds payroll taxes from its employees' salaries.Until the taxes are actually paid to SARS, they appear on the statement of financial position as:

Accepted Answer

The taxes withheld from employees' salaries are considered a liability until they are paid to the government. Therefore, the best choice is C, a liability.

Question 14

Ivan applied for a loan for his business that he will repay in nine months.The best way to describe this loan is as a(n):

Accepted Answer

The loan that Ivan applied for is a current liability because it will be repaid within the next 12 months. Current liabilities are obligations that a company must meet within one year from the date of the balance sheet.

Question 15

Dan wants to make sure he puts his company's assets in the correct categories.Which of the following is an example of a current asset?

Accepted Answer

Inventories are considered current assets because they are expected to be turned into cash within a year or the operating cycle of the business. Land, equipment, and buildings are considered fixed assets or long-term assets because they are not likely to be converted into cash in the near future.

Question 16

Eugenia's company bought a delivery truck to deliver merchandise to customers.This truck should appear as ___________ on the statement of financial position.

Accepted Answer

A delivery truck is a non-current asset as it is expected to be used for more than one year in the operations of the company. Current assets are assets that are expected to be turned into cash within one year or one operating cycle, while inventory refers specifically to the goods held for sale by the company. Short-term investments are typically financial assets held by the company that are expected to be sold or mature within one year.

Question 17

Anna is using a software application to prepare the statement of financial position.She wasn't sure which of the following should be included in the non-current asset category.What would you tell her?

Accepted Answer

The answer of Anna is using a software application to...

Question 18

John wants to know how much his company owns and how much it owes.He should look at the:

Accepted Answer

The statement of financial position (also known as the balance sheet) shows a company's assets (what it owns) and liabilities (what it owes) at a specific point in time. This provides John with the information he is looking for. The other statements listed provide different types of financial information (income and cash flow) but do not specifically show a company's assets and liabilities.

Question 19

Richard has in his warehouse some raw materials and finished goods that he has ready to fill customer orders.These are two types of _____.

Accepted Answer

Raw materials and finished goods held in a warehouse are typically considered as types of inventories. Trade and other payables are liabilities owed to suppliers, and trade receivables are assets representing money owed from customers. Cost of goods is an expense associated with producing the goods, rather than a type of asset held in inventory.

Question 20

Stephanie ordered merchandise from one of her vendors but she doesn't have to pay for it right away.The amount of this purchase will increase Stephanie's:

Accepted Answer

The purchase on credit increases Stephanie's trade and other payables, which are liabilities on the balance sheet.

Quiz 10: Understanding a Firms Financial Statements