Question

QUESTION FOUR [20]

4.1 List the five (5) elements of financial statements. (5)

4.2 Discuss the objectives of financial statements according to the accounting framework. (4)

4.3 List five (5) components of financial statements. (5)

4.4 Explain the two (2) key fundamental assumptions when preparing financial statements. (6)

Answer 1

4.1 Asset, Liabilities, Equity, Revenue, Expenses

4.2 The objectives of financial statements are to provide information about :-

1. Financial position

2. Financial information

3.Cash flow statement

4.Changes in financial position of an enterprise

4.3 Balance sheet, Profit and Loss Account, Statement of Retained Earnings, Cash Flow Statement, Income Statement

4.4 1.Conservatism Assumption :-Revenues and expenses should be recognized when earned, but there is a bias toward earlier recognition of expenses   

2.Going On Concern Assumption::-A business will continue to operate for a foreseeable future and if this assumption is not true then deferred expenses should be recognized at once