Formative Test 1

Question 1

Explain Materiality

Question 2

Explain Relevance

Question 3

Explain Faithful Representation

Question 4

Explain Accounting Entity (and relate to balance sheet)

Question 5

Explain Legal Entity (and relate to balance sheet)

Question 6

Explain Accounting Period (and relate to balance sheet)

Question 7

Explain Going Concern (and relate to balance sheet)

Question 8

Explain Duality (and relate to balance sheet)

Question 9

Explain Monetary Unit convention (and relate to balance sheet)

Answer 9

… Shown in balance sheet by only including assets of monetary value, for example, not including goodwill despite it being a NCA.

Question 10

Explain Historical Cost (and relate to balance sheet)

Question 11

Explain Materiality (and relate to balance sheet)

Question 12

Define internal stakeholders (and their need for financial information)

Question 13

Define external stakeholders (and their need for financial information)

Question 14

Improvements for liquidity, if illiquid

Question 15

Improvements for liquidity, if too much idle funds

Question 16

Improvement for solvency, if highly geared

Question 17

Improvement for solvency, if lowly geared