FAC1502 Unit 2 Financial Position and Accounting Equation Exam Questions with Verified Answers
Latest Update 2024 (100% Pass)
Accounting entity - Answers Every entity for which separate financial records are kept is an accounting
entity. It is crucial to view a business as a separate entity from its owners for accounting purposes.
Financial period - Answers The financial statements of a business entity include a statement of financial
position, providing information about the financial status at the end of a specified period, such as
monthly, quarterly, or annually.
Financial position - Answers Describes the assets, liabilities, and equity of an entity at a specific time,
typically presented in a statement of financial position to communicate financial information to
stakeholders.
Assets - Answers Present economic resources controlled by an entity as a result of past events, with the
potential to produce economic benefits. Assets are classified as current or non-current based on certain
criteria.
Liabilities - Answers Obligations of an entity arising from past transactions, requiring settlement by
transferring assets or providing services. Liabilities can be current or non-current based on their
settlement timeline.
Equity - Answers Represents the residual interest in the assets of an entity after deducting liabilities. It is
the ownership claim on the assets and is also known as net assets or net worth.
Double-entry system - Answers An accounting method where every transaction is recorded with at least
one debit and one credit to maintain the balance of accounting equations, ensuring accuracy in financial
records.
Net worth - Answers The difference between an entity's total assets and total liabilities, representing the
equity or ownership value of the entity.
Basic accounting equation (BAE) - Answers The fundamental accounting equation that states assets
equal liabilities plus equity. It forms the basis for double-entry accounting and reflects the balance sheet
identity.
Non-current liabilities - Answers Long-term debts settled after one year from the financial position date.
Current liabilities - Answers Obligations expected to be settled within 12 months from the financial
position date.
Obligation - Answers Duty or responsibility that an entity cannot practically avoid.
IAS 1.69 - Answers Classification criteria for liabilities as current or non-current.
IAS 37 - Answers Standard for recognizing liabilities when economic benefits are probable.
Latest Update 2024 (100% Pass)
Accounting entity - Answers Every entity for which separate financial records are kept is an accounting
entity. It is crucial to view a business as a separate entity from its owners for accounting purposes.
Financial period - Answers The financial statements of a business entity include a statement of financial
position, providing information about the financial status at the end of a specified period, such as
monthly, quarterly, or annually.
Financial position - Answers Describes the assets, liabilities, and equity of an entity at a specific time,
typically presented in a statement of financial position to communicate financial information to
stakeholders.
Assets - Answers Present economic resources controlled by an entity as a result of past events, with the
potential to produce economic benefits. Assets are classified as current or non-current based on certain
criteria.
Liabilities - Answers Obligations of an entity arising from past transactions, requiring settlement by
transferring assets or providing services. Liabilities can be current or non-current based on their
settlement timeline.
Equity - Answers Represents the residual interest in the assets of an entity after deducting liabilities. It is
the ownership claim on the assets and is also known as net assets or net worth.
Double-entry system - Answers An accounting method where every transaction is recorded with at least
one debit and one credit to maintain the balance of accounting equations, ensuring accuracy in financial
records.
Net worth - Answers The difference between an entity's total assets and total liabilities, representing the
equity or ownership value of the entity.
Basic accounting equation (BAE) - Answers The fundamental accounting equation that states assets
equal liabilities plus equity. It forms the basis for double-entry accounting and reflects the balance sheet
identity.
Non-current liabilities - Answers Long-term debts settled after one year from the financial position date.
Current liabilities - Answers Obligations expected to be settled within 12 months from the financial
position date.
Obligation - Answers Duty or responsibility that an entity cannot practically avoid.
IAS 1.69 - Answers Classification criteria for liabilities as current or non-current.
IAS 37 - Answers Standard for recognizing liabilities when economic benefits are probable.
