Which three statements are the principal financial statements?
The statement of financial position, the statement of profit or loss, and the statement of cash flows.
What does the statement of financial position show at a specific date?
A business’s assets, liabilities, and capital.
What are assets in a business?
Resources under the business’s control.
Which examples of assets are listed in the statement?
Cash, trade receivables, inventory, and non-current assets.
How long do current assets typically remain unchanged?
Not for long.
How long do non-current assets stay in a business?
For a long time.
What are liabilities in a business?
Amounts the business is obliged to pay to others.
What examples of liabilities are listed in the statement?
Trade payables, tax and VAT owing, and loans to be repaid.
When are current liabilities payable?
Within one year of the statement date.
What is capital in a business?
The amount invested by its owner or owners.
Which transactions does the Kitchen Kit example record when preparing a statement of financial position?
The owner’s deposit, non-current asset purchases, credit inventory purchases, and a loan.
What happens to assets when inventory is bought on credit?
Assets increase through inventory.
What happens to liabilities when inventory is bought on credit?
Liabilities increase through trade payables.
What increases capital when the owner contributes personal resources?
The owner invests more personal resources.
What decreases capital when the owner withdraws resources?
The owner makes drawings.
What business result decreases capital?
A loss decreases capital.
What can high current assets alongside high current liabilities indicate about a business?
It may struggle to pay debts as they fall due.
What are the two key characteristics of useful financial information?
Relevance and faithful representation.
What does faithful representation require of financial information?
It must be complete, neutral, and free from error.
How can the accounting equation be rearranged to calculate liabilities?
With £78,000 in assets and £14,000 in liabilities, what is the capital?
£64,000.
How much cash did Kitchen Kit report on 10 February?
£113,500.
How much did Kitchen Kit owe suppliers on 10 February?
£72,000.
How much stock did the toy shop hold?
€40,000.
How much did the toy shop have in the bank?
€2,000.
Why could the toy shop run out of cash before Christmas sales?
It owed suppliers €35,000 within 30 days.
How much did the construction firm have tied up in unfinished buildings?
€500,000.
How much did the construction firm owe subcontractors due the following month?
€300,000.
Which four characteristics additionally enhance useful financial information?
Comparability, verifiability, timeliness, and understandability.
What did Macy’s discover about its delivery expenses in 2024–2025?
An employee had hidden up to $154 million in delivery expenses for almost three years using accrual entries.
What should students understand about large-company financial statements?
Their basic layout and terminology.
Answer 18 questions on Statement of Financial Position.
1. A business buys inventory on credit. What is the immediate effect on its statement of financial position?
2. A student is learning to read Amazon's financial statements. Which skill best matches the expected understanding of large-company reporting?
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