Current Liabilities Explained

What primary information does the statement of financial position provide?

The accounting equation states that Assets = Liabilities + Equity.

How are assets typically classified on a statement of financial position?

Claims against an entity's assets by parties other than the owners are classified as ________.

Match the liability classification with its definition.

Which of the following is typically classified as a current liability?

A bank overdraft is classified as a non-current liability.

What is the definition of 'equity' in the context of a statement of financial position?

The two primary components of equity are contributed capital and ________.

Match the equity component with its description:

Which of the following best describes 'retained earnings'?

Reserves are always available for distribution to shareholders.

Name two common formats for presenting a statement of financial position.

The ________ convention dictates that a business and its owners are treated as separate and distinct entities.

Match the accounting principle to its description:

The 'prudence convention' in accounting emphasizes:

The stable monetary unit convention allows for adjustments to financial statements based on inflation.

Give an example of an item that is generally NOT recognized as an asset according to GAAP, despite potentially providing future benefits.

According to the definition of equity, equity the ________ interest in the assets of the entity after deducting all its liabilities.

Match the term on the left with what it affects of the accounting equation (A: Assets, L: Liabilities, OE: Owner's Equity):

A business purchases equipment using cash. Utilizing information about the accounting equation, what is the effect of this transaction?

Owner's equity represents the wealth of the owner.

On a simple statement of financial position, what is the formula to calculating 'net assets?'

The statement of changes in equity is related to the statement of financial position because the 'profit/loss' is transferred to the _______ account in the statement of financial position.

Match the presentation of equity to the type of enterprise:

At what point in time does the balance sheet portray a company?

Financial statement are not affected by accounting conventions and doctrines.

What are the three main factors that influence financial reports?

What convention in accounting allows for caution when making judgements so not to favor overstating revenues but cautiously stating liabilities? ________.

Match the appropriate accounting convention/doctrine with the definition:

Of the following conventions, which specifies that each transaction has opposite (i.e., 'dual') aspects?

The money measurement convention states that monetary terms do not always need to be used with accounting.

What determines that items are recorded and reported on financial statements according to GAAP?

Liabilities are an amount ______ by the company to outside parties.

Match where this goes on Financial statements: (BS = Balance Sheet)

What two pieces comprise Equity?

At the end of every year, income received is removed.

What is the goal of a business that owners need to understand?

There is a relationship between a statement of financial performance and a statement of financial ________.

Match: A. is what the company owes, B. a resource, C. is the owners investment

What is the purpose of the statement of financial position (balance sheet)?

In the accounting equation, what are the two main categories that make up the 'claims' against a company's assets?

Which of the following is NOT a format for the statement of financial position?

The historical cost convention always reflects the current market value of an asset.

Under the prudence convention, accountants should exercise ______ when making judgements, placing greater emphasis on expected losses than expected profits.

The going concern convention assumes that a business will:

The dual aspect convention states that each transaction has one aspect.

Which convention states that only items that can be expressed in monetary terms should be included in financial statements?

What does owner's equity represent, and what does it NOT represent?

Which of the following elements are included in the statement of changes in equity?

Retained earnings represent cash that is available for distribution to shareholders

Statement of financial position can be presented in a ______ or horizontal format.

Which format lists assets on one side and liabilities and equity on the other?

Current assets are usually listed in order of:

The statement of financial position is useful to assess a company's profitability over a given period.

Which item cannot be used as a factor to influence financial reports?

The “missing liabilities” are in the Balance Sheet

What is the key function of financial accounting?

How does financial reporting standards change for smaller companies?

What kind of liabilities are provisions?

Employee skill level could affect recognition of reports

Accounts Payable describes amounts owed to:

Non-Current liabilities is settled in the year

What is a main difference with a Non-Current assets and current asset?

Assets equals Retained earnings

Accurals desribe:

A bank overdraft is a great asset to have

Provisions describe:

It is common for sole-proprietorships to have share-capital

What are some of the topics shown in the income statement?

The main goal of a business is to minimize revenue.

Which of these best describes the going assumption?

Revenues from past years will be included in current consolidated revenue.

What best described the definition of Revenue?

Only a small handful of factors will affect business reports

Which factor would likely have the biggest impact on business accounts?

The balance sheet and the the equity statement are separate.

Which of these correctly describes what the gross profit is in relation to profit?

Grossprofit = Netprofit - All expenses.

Match the following terms with their descriptions:

Which of the following describes the primary purpose of the statement of financial position?

The basic accounting equation states that Assets = Liabilities - Equity.

Which of the following is an accurate representation of the accounting equation?

How are liabilities typically classified on a statement of financial position?

Current liabilities are obligations due within twelve months or the normal operating cycle, whichever is longer.

Amounts owed to suppliers for goods purchased on credit are known as ______.

Which of the following is considered a non-current liability?

What is the fundamental difference between current and non-current liabilities?

Equity represents the owner's residual interest in the assets of a business after deducting liabilities.

Which of the following is NOT a component of equity?

Retained earnings represent:

Setting up a specific reserve for a defined purpose is an example of a ______ of retained earnings

The statement of financial position can be presented in only one format.

Which convention states that a business and its owners are treated as distinct entities?

According to the historic cost convention:

What does the 'going concern' convention assume about a business?

The money measurement convention allows all resources, including non-monetary items like employee skills, to be included on the statement of financial position.

What is the main purpose of the statement of financial performance?

A company is contracted to provide services over multiple reporting periods. When should revenue be recognized?

Match the term with its appropiate definition: