You have been talking to someone who had read a few chapters of an accounting text some
Question:
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 needs to be worth something in the market – that is all.
(c) The accounting equation is:
Assets + Equity = Liabilities
(d) Non-current assets are things that cannot be moved.
(e) Goodwill has an infinite life and so should not be amortised.
Required:
Comment critically on each of the above statements, going into as much detail as you can.
GoodwillGoodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
Step by Step Answer:
Accounting An Introduction
ISBN: 9780273733201
5th Edition
Authors: Eddie McLaney, Dr Peter Atrill, Eddie J. Mclan