Read the summary and the most important questions on Accounting and Finance for non-specialists 11th edition | 9781292244013 | Peter Atrill Eddie McLaney

• 2 Financial position

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• What are the qualifications for an asset to be included in the financial position?

  • It must be an economic resource
    
  • The economic resource must be under the control of the business
  • The event, or transition, leading to control of the resource must have occurred in the past
  • The economic resource must be capable of measurement in monetary terms
    

• Types of assets that can appear in the financial position

  • Property
    
  • Plant and equipment
  • Fixtures and fittings
  • Patents and trademarks
  • Trade receivables
  • Investments outside the business

• What does the business entity convention do?

  It treats the business and the owner as being separate and distinct. This is for accounting purposes.

• What does the historic cost convention do

  It shows that assets and liabilities are shown on the financial statement at ORIGINAL costs, even if the value of the asset has changed.

• What does the prudence convention do?

  It states that final accounts should always report conservative and cautious figures.

• What does the dual aspect convention do?

  Asserts that each transaction has two aspects, both of which will affect the statement of financial position. 
  
  Example; The purchase of a computer will result in an increase in assets and a decrease in cash.

• 3 Measuring and reporting financial performance

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• What must be identified in order to measure profit?

  The total revenue

• What are the two methods for deprecation?

  1. The straight line method
     
  2. The reducing-balance method

• What does the straight line method do?

  It allocates the amount to be depreciated evenly over the useful life of the assets. There will be an equal depreciation expense for each year the asset is held.

• What does the reducing-balance method apply?

  It applies a fixed percentage rate of deprecation to the carrying amount of the asset each year.