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Accounting Funda Bro

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Submitted By rexy
Words 658
Pages 3
Topic 2- Measuring and Reporting Financial Position
Nature and Purpose of the Statement of Financial Position 75-80
Activity 2.1
Discussion Questions

3.11-> Why is the statement of financial position also called a ‘balance sheet’? The statement of financial position is also called the Balance sheet because part of the functionality of the statement of financial position is to display and explain the balance of the company’s accounts.

3.31-> ‘The statement of financial position shows how much a business is worth.’ Do you agree with this statement? Discuss.
I believe this statement to be partially correct. The reason being is that the statement of financial position give an overall summary of all of the businesses assets against its liabilities and this gives an indication of the amount of Equity in the business. This however does not completely equate to the overall value of a business. Employees, facilities provided etc are all other contributors that cannot be valued and are not included in this document that would greatly affect the success of any business.

The Accounting Equation 80-82
Activity 2.2
Discussion Questions

Activity 3.17-> Why is the accounting equation always in balance?

The accounting equation is always in balance because one side always reflects the other side. For example, if you were to have $20,000 in cash (asset), you would need to have $20,000 in liabilities (owners equity). Lets say you now purchased a new vehicle for $15,000, cash would be reduced to $5000 tipping the balance, however the vehicle would then become as asset evening out the balance. This is how the balance sheet is always equal.

Application Questions

Effects of transactions on the statement of financial position 82-84
Activity 2.3
Discussion Questions

3.2-> Do all accounting transactions affect the statement of financial position?
Yes,

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