Financial Statements Ch 1 and 2

What is the definition of income?

• Decrease in assets or increases in liabilities that result in decreases in equity, other than those relating to contributions from holders of equity claims

• Increase in assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from holders of equity claims

What is the definition of an expense?

• Decrease in assets, or increase in liabilities, that result in decreases in equity, other than those relating to distributions of holders of equity claims

• A form of savings
• Increase in assets, or decrease in liabilities, that result in increases in equity, other than those relating to distributions of holders of equity claims

• Cost incurred or payment made for goods or services.

What is the definition of an asset?

• A present economic resource controlled by the entity as a result of past events.

• A resource with economic value.
• The residual interest in the assets of an entity after deducting all of its liabilities.

• A non-tangible resource.

What is the definition of a liability?

• A liability is an asset owned by a company.
• The residual interest in the assets of the entity after deducting all of its liabilities.

• A liability is a cost incurred by a company.
• Present obligation of the entity to transfer an economic resource as a result of past events

What is the definition of an economic resource?

• An economic resource is a fictional concept with no real-world application.
• An economic resource is a right that has the potential to produce economic benefits.

• An economic resource is a type of animal found in the wild.
• An economic resource is any natural or human-made asset that can be used to produce goods and services.

Which of the following are the fundamental qualitative characteristics

• Comparability

• Verifiability

• Relevance

• Faithful representation

Which of the following are enhancing qualitative characteristics?

• Relevance

• Faithful Representation

• Verifiability

• Timeliness

What does the regulatory framework comprise of?

• Accounting Standards

• Company Law

• Rules, regulations, and guidelines set by governing bodies.
• Conceptual Framework for Financial Reporting

Which of the following are examples of capital reserves?

• Revaluation Reserve

• Share Capital

• Share premium

• Retained Earnings

A company has 100,000 ordinary shares of 50p each. These were issued at £1 each. What is the value to be included within Share Capital?

• £25,000
• £50,000
• £75,000
• £100,000