COMM1140 – Financial Management Week 1: Tutorial Questions
DQ1.2 Distinguish between financial performance and financial position.
Financial performance involves the effectiveness of an entity to generate profit from business
operations. It is often shown as an income statement showing revenues earned and expenses
incurred over a period of time.
Financial position is the set of financial resources and obligations of an enterprise at a particular
point in time. This is often reflected as a balance sheet showing an entity’s resources (assets)
and how they were financed (liability and equity).
DQ1.6 List four important users of financial accounting and describe the use that each user
would make of the information.
Management
Profitability of different divisions
Bankers
Determine credit rating
Shareholders
Prospect of future dividends
Suppliers
Determine ability to pay back on time
DQ1.11 Describe what is meant by accrual accounting. How does it differ from cash accounting?
Accrual accounting records where revenues and expenses occurred over a period of time and
the impact of these transactions on financial statements. Whilst accrual accounting focuses on
revenue/expenses, cash accounting regards when cash is received or paid and its effect on the
cash flow statement.
P1.11 Match each item with the financial statement that it would appear in by ticking the
appropriate column.
Item
Asset
Inventory
/
Liability
Shareholders’ Equity
Revenue
Cleaning expenses
Cash at bank
/
/
Marketing expenses
Buildings
/
/
Income taxes payable
/
Loans from banks
/
Accounts payable
/
Retained profits
Accounts receivable
Expense
/
/
Income tax expense
/
Cost of goods sold
/
Sales Revenue
/