AFM 101 Exam Questions & Answers 2023/2024
What is the normal form of the accounting equation? - ANSWER-Assets = Liabilities + Owners Equity
Define 'Asset' - ANSWER-Anything the company owns and is not mortgaged/ loaned
What is an example of an asset? - ANSWER-Paid for stock
Define 'l...
What is the normal form of the accounting equation? - ANSWER-Assets = Liabilities + Owners Equity
Define 'Asset' - ANSWER-Anything the company owns and is not mortgaged/ loaned
What is an example of an asset? - ANSWER-Paid for stock
Define 'liability' - ANSWER-Anything that is owed to other people/ businesses
What is an example of a liability? - ANSWER-Bank loan/ mortgage
What is another way to write the accounting equation? - ANSWER-Owner's Equity = Assets - Liabilities
Define equity - ANSWER-What is left over after your assets have 'paid off' your liabilities
What do financial statements consist of? - ANSWER-A balance sheet, an income statement statement of
changes in equity, and a statement of cash flows
What three main elements does a balance sheet consist of? - ANSWER-Assets, liabilities and owners
equity
What does an income statement consist of? - ANSWER-Revenue - (minus) expenses = net profit
What are the two other names that are used for an 'income statement'? - ANSWER-Profit and loss
statement and statement of financial performance
, What does a statement of changes in equity represent? - ANSWER-It represents the owner's interest in
the business.
What three aspects are included in a statement of changes in equity statement? - ANSWER-Personal
funds invested, profits retained in the business and withdrawal of assets the owner may have made
What is the format used for a 'statement of changes in equity'? - ANSWER-Owner's capital = opening
balance + profit + capital introduced - less drawings = owner's capital - closing balance
What does CAMP PEG stand for? - ANSWER-Cost, Accounting period, Matching, Profit recognition,
Prudence principle, Entity concept, Going concern
Define 'cost' - ANSWER-items recorded at their historical cost
Define 'accounting period' - ANSWER-accounting recorded for a specific time (e.g. 1 year)
Define 'matching' - ANSWER-the recording of expenses (inputs) to the same period as the revenues
(outputs) so they match
Define 'profit recognition' - ANSWER-revenue must be recognised in the period in which it was earned
What is another term used for 'profit recognition'? - ANSWER-revenue recognition
Define 'prudence principle' - ANSWER-the recording of revenue only when it is certain and the recording
of expenses only when they are probable
Define 'entity concept' - ANSWER-reports used for a specific entity
Define 'going concern' - ANSWER-accounts produced on the basis that the entity will continue in the
future
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