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Discussion Questions - Balance Sheet

The document discusses measuring and reporting a company's financial position through a balance sheet. It includes discussion questions about the characteristics of assets and liabilities, how assets are valued, the nature of retained earnings, examples of intangible assets, why some valuable resources are not reported as assets, why the accounting equation must always balance, and how current and non-current items are classified. It also includes application exercises to complete partial balance sheets and prepare balance sheets from lists of asset and claim amounts.

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490 views2 pages

Discussion Questions - Balance Sheet

The document discusses measuring and reporting a company's financial position through a balance sheet. It includes discussion questions about the characteristics of assets and liabilities, how assets are valued, the nature of retained earnings, examples of intangible assets, why some valuable resources are not reported as assets, why the accounting equation must always balance, and how current and non-current items are classified. It also includes application exercises to complete partial balance sheets and prepare balance sheets from lists of asset and claim amounts.

Uploaded by

jakelaker
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Week 3 Topic: Measuring and reporting financial position (Balance Sheet)

___________________________________________________________________________

DISCUSSION QUESTIONS

2.1 What are the main characteristics of assets and liabilities from an accounting perspective? Is
this consistent with a non-accounting definition?

2.2 What is the primary measure used for asset valuation on the statement of financial position?
What is the source of this measure and justification for its use?

2.3 What sort of account is ‘retained earnings’?

2.4 What sort of accounts would be included in the intangible asset category?

2.5 Provide examples of valuable resources of a business that will not be included as assets on
the statement of financial position. Why does this occur?

2.6 Why is the accounting equation always in balance?

2.7 Describe the basis used to determine whether an asset is classified as current or non-current.
Is the same basis used for the classification of liabilities?

2.15 ‘The statement of financial position shows how much a business is worth.” Do you agree with
this statement? Discuss

APPLICATION EXERCISES

Please prepare the answers for the questions below and share them during the zoom session.
We will let you share your screens.

AE2.5 Complete the table by inserting the missing figures.

(a) (b) (c) (d)


Current assets 13,900 18,300 13,200 ?
Non-current assets 51,600 71,600 110,700 69,600
Current liabilities 14,200 11,900 9,600 17,500
Non-current 17,900 ? 41,500 51,200
liabilities
Opening capital 20,700 29,200 ? 26,700
Profit or loss 19,600 17,900 37,400 (9,500)
Drawings ? 8,700 11,700 7,200
AE2.7 The following is a list of the assets and claims of Crafty Engineering Ltd as at 30 June
2014:

$
Accounts payable 86,000
Motor vehicles 38,000
Loan from bank 260,000
Machinery and tools 207,000
Bank overdraft 116,000
Inventory 153,000
Freehold premises 320,000
Accounts receivable 185,000

(a) Using the vertical format, prepare the statement of financial position of the business as at
30 June 2014 from the above information.
(b) Discuss the significant features revealed by this financial report.

1. A significant proportion of the assets are non-current (62.6%).


2. Long-term funds cover the non-current assets adequately (124.1%).

Additional Question

Balances of assets and claims for Erasmus Traders at 30 June are provided below:
$
Cash at bank 18,000
Cash on hand 500
Land and buildings 320,000
Inventory 180,000
Accounts payable 30,500
Plant and machinery ????
Bank loan 600,000
Motor vehicles 144,000
Accounts receivable 74,000
Equity 450,000

Determine the missing value for the ‘Plant and machinery’ account. Prepare a statement of
financial position in the standard vertical format.

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