You have been talking to someone who had read a few chapters of an accounting text some years ago. During your conversation the person made the following statements:

(a) The income statement shows how much cash has come into and left the business during the accounting period and the resulting balance at the end of the period.

(b) In order to be included in the statement of financial position as an asset, an item must have a resale value - that is all.

(c) The accounting equation is:

(d) Non-current assets are things that cannot be moved.

(e) Goodwill has an indefinite life and so should not be amortised.
Required:
Comment critically on each of the above statements, going into as much detail as you can. (E.6)

Transcribed Image Text:

Assets+ Equity = Liabilities