le at 304-551-1888 Burse wil consist of reading and responding to the material r

Question

le at 304-551-1888 Burse wil consist of reading and responding to the material read. Please email your me (do not post them in Blackboard). Please feel free to contact me or sto questions Log-in to the MBA Es Accoutng etios Ccountn ttow are liabl.wes a-d Stockholderí equity ?¡milar is aitount similar. equw 2. 3 ths are emeus and esns measund poide 5 On whah crped busin,? des the b.len', dret oalance. hu must accouatn Shrch long em asret have on amounts at A Company purchared equipment hogo, carh. The ven dor state thet t equipment ork 92400 At whot amt Shousqp be e corde Cat amoun w h

Explanation / Answer

Question 1:

Liabilities are similar to stockholders equity in a way that they both are obligations to the company. Liabilities are payable to outsiders. Stock holders equity is payable to owners because as per business entity concept of accounting company and owners are seperate and so it is considered as payable to owners.

Question 2:

Accounts payable is form of liabilty and answer is same as Question 1.

Question 3:

There are two methods of measuring known as cash method and accrual method.

Under cash method only when income is received we recognise and only when payment is made we recognise expense.

Under accrual method, whenever income is earned it is recognised and when expense is incurred we recognise a expense.

Question 4:

Statement of retained earnings reconciles the opening retained earnings with the closing retained earnings.

It provides the income distributed to stockholders as dividends and the income retained for growth purpose from the total income earned during a particular year.

Question 5:

Balance sheet provides the information based on financial aspect of business.

Question 6:

Accounting equation is as follows:

Assets = Liabilities + Equity

It should always balance and this can be explained with help of an illustration.

Illustration: When we buy a asset we either buy with our money (Equity) or by borrowing (Liabilitiy) or combination of both. Hence Asset should always be equal to Equity and liabilities.

Question 7:

Going concern assumes that an entity continues to exist in the forseeable future. So the entity recognises depreciation for long term assets and hence reducing the original cost recorded in books. So going concern effects the value at which long term assets are carried in the balance sheet.

Question 8:

At the time of initial recognition we record the asset at purchase price. At the end of financial year we bring such value to the market value by either transferring gain/loss to profit or loss account. So the asset will be initially recognised at $2000.

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