An accountant prepares a statement of financial position for a business. In this statement,the equity of the owner was shown next to the liabilities. This confused the owner, who argued: ‘My equity is my major asset and so should be shown as an asset on the statement of financial position.’ How would you explain this misunderstanding to the owner?
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01. An accountant prepares a
02. ‘The statement of financial position shows how much a business is worth.’ Do you agree with this statement? Explain the reasons for your response.
03.“When evaluating projects, we’re concerned with only the relevant incremental after-tax cash flows. Therefore, because
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- Which of the following is the principle that a business must report any business activities that could affect what is reported on the financial statements? A. revenue recognition principle B. expense recognition (matching) principle C. cost principle D. full disclosure principleThat a business may only report activities on financial statements that are specifically related to company operations, not those activities that affect the owner personally, is known as which of the following? A. separate entity concept B. monetary measurement concept C. going concern assumption D. time period assumptionAn accountant prepares a statement of financial position for a business. In this statement,the equity of the owner was shown next to the liabilities. This confused the owner, who argued: ‘My equity is my major asset and so should be shown as an asset on the statement of financial position.’ How would you explain this misunderstanding to the owner?
- I. Direction: Identify what describes the following statement. Write your answer on the blank before the number. ____________________1. It pertains to the state of one’s personal monetary affairs.____________________2. It measures the ability to generate earnings from its resources or investments. ____________________3. It measures the ability to generate profit that ensures to pay business expenses and maintain a long-term financial success of the business. ____________________4. It measures the ability of the company to settle its short term debts. ____________________ 5. It measures how the business manage its assets or resources to produce output without wastage. ____________________6. It presents the financial statement amounts as a percentage of a base number. ____________________7. It is used to evaluate a number of issues with an entity, such as its liquidity, efficiency of operations, and profitability. ____________________8. These users of financial information are interested…Which of the following statements is (are) not consistentwith generally accepted accounting principles relating toasset valuation?a. Most assets are originally recorded in accountingrecords at their cost to the business entity.b. Subtracting total liabilities from total assets indicateswhat the owners’ equity in the business is worth undercurrent market conditions.c. Accountants assume that assets such as offi ce supplies,land, and buildings will be used in business operationsrather than sold at current market prices.d. Accountants prefer to base the valuation of assets on objective, verifi able evidence rather than upon apprais-als or personal opinions.Why should an individual learn to read and interpret financial statements?(a) Understanding financial statements will guarantee at least a 20% return on investments.(b) An individual need not learn to read and interpret financial statements because auditors offer a report indicating whether the company is financially sound or not.(c) Learning to read and interpret financial statements will enable individuals to gain employment.(d) Individuals cannot necessarily rely on auditors and management of firms to offer honest information about the financial well-being of firms.
- Direction: Identify what describes the following statement. Write your answer on the blank before the number. ____________________1. It pertains to the state of one’s personal monetary affairs. ____________________2. It measures the ability to generate earnings from its resources or investments. ____________________3. It measures the ability to generate profit that ensures to pay business expenses and maintain a long-term financial success of the business. ____________________4. It measures the ability of the company to settle its short term debts. ____________________ 5. It measures how the business manage its assets or resources to produce output without wastage. ____________________6. It presents the financial statement amounts as a percentage of a base number. ____________________7. It is used to evaluate a number of issues with an entity, such as its liquidity, efficiency of operations, and profitability. ____________________8. These users of financial information are…Question:Prepare a reflection paper that incorporates your answers to the following independent questions: 1. What problems can you foresee if a business manager does not have a basic knowledge of accounting? 2. The owner of a company asks you if he can charge all his personal expenses to his business. He said that he owns the company anyway. Explain to the business owner the business entity assumption and the ethical considerations of his idea. 3. After examining the financial statements, the owner of a small business expressed surprise that the firm's cash balance had decreased during the month even though there was substantial net income. Do you think this owner is right to expect the cash to increase because of a substantial net income? Why or why not? 4. Jiffy Trading runs 10 branches and pays for a variety of expenses. Anna, the Accounts Payable Clerk of Jiffy Trading writes the checks for each supplier and the Accounting Manager signs the checks. Anna decided she…A. Identify the nature of each account using the letter A for assets, L for liabilities, SE for shareholders’ equity, R for revenue, E for expenses, and NA for not applicable. B. Calculate net income for the period. C. How much has been earned by the company’s operations but not distributed to shareholders? D. What is the total investment by shareholders? E. How much do customers owe the company?
- Provide the best words to describe each of the statements below According to this principle the book of account should not reflect the personal affairs of the wealth of the owners outside of the business.it assumes that the books of the business are drawn up to reflect the wealth of the owner inside his business onlyFactors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency, profitability, and liquidity. O True False 00Which of the following statements about a firm's financial statements is true? a. An income statement helps a small business owner know the financial strengths and capabilities of the business—something that cannot be known in any other way. b. Small business owners tend to pay close attention to the firm's income statement, but much less attention to the balance sheet. c. A mistake that many small business owners is viewing the balance sheet and income statement as complements of each other rather than treating them as separate reports. d. None of these are correct.