Observation

 

 

Majority of the candidates that attempted Question 4 on items of balance sheet averagely well. However, the significant weakness of candidates to this question was their mix-up of current asset with current liabilities.

Some of the suggested responses were:

4(a)     

1. Fixed Assets:

• These are long term resources owned by a business;
• They are capable of yielding economic benefits now and in the future;
• These are resources that may be used by a business for more than one year;
• These resources are not meant for resale.

Examples of Fixed Assets include:

• Land;
• Building;
• Premises;
• Plant;
• Machinery;
• Office equipment;
• Motor vehicle;
• Furniture;
• Fittings;
• Fixtures;
• Goodwill;
• Patent.

 

2. Current Assets:

• These are resources of the business held for a period of one year;
• They can change form or can easily be converted to cash;
• They are used for the day-to day running of the business.

Examples of Current Assets include:

• Stock or inventory;
• Debtor or account receivables;
• Expenses prepaid or prepayment;
• Cash at bank;
• Cash in hand;
• Income owed.

 

3. Capital:

• These are resources introduced by the owners of a business;
• They may be in the form of cash and or asset.
• These represents the amount of claim an owner has on the resources of the business.         

Examples of Capital include:

• Shares;
• Loan capital or Debentures;
• Cash;
• Property;
• Plant;
• Equipment;
• Working capital.

 

4. Intangible Assets:

• These are non-monetary assets;
• They can neither be seen nor touched or they have no physical form.

Examples of Intangible Assets include:

• Trade mark;
• Patent;
• Royalties;
• Goodwill;
• Copyright;
• Preliminary expenses;
• Software licenses;
• Franchises;
• Intellectual property.

 

5. Current Liabilities:

• These are financial obligations of the business;
• They are expected to be honoured within a period of one year.

Examples of Current Liabilities include:

• Trade creditors or account payables;
• Bank overdraft;
• Expenses accrued
• Income prepaid;
• Unearned revenue;
• Customer deposit;
• Current portion of long-term loans.