Presentation of Financial Statements Very Short Answer Type Questions

Question 1.
What is Balance sheet?
Answer:
Its shows the entity’s assets, liabilities and stockholders’ equity as of the report date. It does not show information that covers a span of time.

Question 2.
What do you mean by Income statement?
Answer:
It shows the results of the entity’s operations and financial activities for the reporting period. It includes revenues, expenses, gains, and losses.

Question 3.
Define Asset.
Answer:
It is a resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Question 4.
Define Liability.
Answer:
It is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

Question 5.
What is Expenses?
Answer:
They are the decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.

Question 6.
Expand SOCE.
Answer:
SOCE – Statement of Changes in Equity

Question 7.
Define Statement of Changes in Equity.
Answer:
Statement of Changes in Equity, often referred to as Statement of Retained Earnings in U.S. GAAP, details the change in owners’ equity over an accounting period by presenting the movement in reserves comprising the shareholders’ equity.

Question 8.
What is Restated Balance?
Answer:
This represents the equity attributable to stockholders at the start of the comparative period after the adjustments in respect of changes in accounting policies and correction of prior period errors as explained above.

Question 9.
What are Dividends?
Answer:
Dividend payments issued or announced during the period must be deducted from shareholder equity as they represent distribution of wealth attributable to stockholders.

Question 10.
What do you mean by Closing Balance?
Answer:
This represents the balance of shareholders’ equity reserves at the end of the reporting period as reflected in the statement of financial position.

Question 11.
Give the meaning of Non-current Assets.
Answer:
A non current asset is an asset that is not likely to turn to unrestricted cash within one year of the balance sheet date. A noncurrent asset is also referred to as a long-term asset.

Question 12.
What do you mean by controlling interest?
Answer:
Controlling interest is when one shareholder or a group acting in kind holds a high enough percentage of ownership in a company to enact changes at the highest level. By definition, this figure is 50% of the outstanding shares or voting shares, plus one.

Question 13.
Mention any two items of other income.
Answer:
a. Income from Interest, Dividend Received, commission received, rent received etc.

Question 14.
Discuss the standard contents of a set of financial statements.
Answer:
1. Balance sheet: Shows the entity’s assets, liabilities, and stockholders’ equity as of the report date. It does not show information that covers a span of time.

2. Income statement: Shows the results of the entity’s operations and financial activities for the reporting period. It includes revenues, expenses, gains, and losses.

3. Statement of cash flows: Shows changes in the entity’s cash flows during the reporting period.

Question 15.
What are the Objectives of financial Statements?
Answer:

To determine the ability of a business to generate cash and the sources and uses of that cash.
To determine whether a business has the capability to pay back its debts.
To track financial results on a trend line to spot any looming profitability issues.
To derive financial ratios from the statements that can indicate the condition of the business.
To investigate the details of certain business transactions, as outlined in the disclosures that accompany the statements.