Question 1 The application of the accrual accounting principle and the cash accounting principle in recognising revenues and expenses could result in the amount of profit reported in a period to be different from the total cash in the period Explain why this difference could happen TASK Explain your answer by using one of the transactions in part A above as an example 5 marks Banks always need an audited financial statement to be submitted together with the application for a loan Explain why the banks require the audited financial statements in assessing the loan applications TASK Explain your answer 4 marks Shareholders of a limited liability company have a limited risk of losing their investment during the difficult financial situation The maximum amount of money they could lose is the amount of their investment in the company If there is only a limited amount of money resources available in the limited liability company, how could the companys creditors recover the debts if the company is going to be closed down TASK Explain your answer 4 marks It is a common occurrence that a large company is owned by a group of people who are not the managers of the company In this situation, how to ensure that the management always serve the best interest of the owners TASK Explain your answer 4 marks Total 25 marks

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Posted on Sep 30, 2024

Question 1

The application of the accrual accounting principle and the cash accounting principle in recognising revenues and expenses could result in the amount of profit reported in a period to be different from the total cash in the period. Explain why this difference could happen.

[TASK] Explain your answer by using one of the transactions in part A above as an example.

[5 marks]

Banks always need an audited financial statement to be submitted together with the application for a loan. Explain why the banks require the audited financial statements in assessing the loan applications.

[TASK] Explain your answer.

[4 marks]

Shareholders of a limited liability company have a limited risk of losing their investment during the difficult financial situation. The maximum amount of money they could lose is the amount of their investment in the company. If there is only a limited amount of money/resources available in the limited liability company, how could the companys creditors recover the debts if the company is going to be closed down?

[TASK] Explain your answer.

[4 marks]

It is a common occurrence that a large company is owned by a group of people who are not the managers of the company. In this situation, how to ensure that the management always serve the best interest of the owners?

[TASK] Explain your answer.

[4 marks]

[Total: 25 marks]