Question 1

•	Assets

Accepted Answer

A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity (e.g., Inventory, Accounts Receivable, Van).

Question 2

•	Liabilities:

Accepted Answer

A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits (e.g., Bank Overdraft, Loan, Accounts Payable).

Question 3

•	Equity:

Accepted Answer

The residual interest in the assets of the entity after deducting all its liabilities (Assets - Liabilities = Equity).

Question 4

•	Income (Revenue):

Accepted Answer

Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants (the owners).

Question 5

•	Expenses:

Accepted Answer

Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants (drawings).

Question 6

•	Accrual Basis:

Accepted Answer

The accounting method where transactions are recorded in the periods in which they occur, regardless of when the cash is exchanged. This is the basis used for the Income Statement.

Question 7

•	Cash Basis:

Accepted Answer

The accounting method where transactions are only recorded when cash actually changes hands. This is the basis used for the Cash Flow Statement.

Question 8

•	Accounts Receivable (Debtors):

Accepted Answer

An asset representing money owed to the business by customers who have bought goods on credit. (Income has been recognized, but cash has not yet been received).

Question 9

•	Accounts Payable (Creditors):

Accepted Answer

A liability representing money the business owes to suppliers for goods bought on credit. (An expense or asset has been recognized, but cash has not yet been paid).

Question 10

•	Depreciation:

Accepted Answer

The systematic allocation of the cost of a tangible asset over its useful life. Crucial Note: This is a non-cash expense. It decreases profit but does not involve a cash outflow, so it never appears on a Cash Flow Statement.

Question 11

•	Balance Day Adjustments:

Accepted Answer

Adjustments made at the end of the period (like Prepayments or Accrued Expenses) to ensure the Income Statement reflects the correct profit under the accrual basis.

Question 12

•	Cash Flow Statement:

Accepted Answer

A financial statement that shows the actual movement of cash in and out of a business during a specific period. Unlike the Income Statement, it excludes non-cash items like depreciation.

Question 13

•	Cash:

Accepted Answer

Notes, coins, and money held in the bank account (cheque or savings).

Question 14

•	Cash Equivalents:

Accepted Answer

Highly liquid, short-term investments that are easily convertible to known amounts of cash and subject to an insignificant risk of changes in value (e.g., term deposits maturing within three months).

Question 15

•	Net Cash Flow:

Accepted Answer

The difference between total cash inflows and total cash outflows. This results in either a "Net Increase" or "Net Decrease" in cash for the period.

Question 16

•	Operating Activities

Accepted Answer

Cash flows relating to the day-to-day trading activities of the business.

Question 17

•	Receipts from Customers:

Accepted Answer

Cash received from the sale of goods or services.

Question 18

•	Payments to Suppliers/Employees:

Accepted Answer

Cash paid to buy goods/services (inventory, electricity, rent) or to pay staff wages.

Question 19

•	GST Paid/Received:

Accepted Answer

The net amount of GST paid to or received from the Inland Revenue Department (IRD).

Question 20

•	Investing Activities:

Accepted Answer

Cash flows related to the acquisition and disposal of long-term assets and other investments.

Question 21

•	Purchase/Sale of Property, Plant, and Equipment (PPE):

Accepted Answer

Cash paid to acquire fixed assets (e.g., vehicles, machinery) or cash received from selling old assets.

Question 22

•	Term Investments

Accepted Answer

Cash paid to acquire long-term investments or cash received from the maturity of those investments.

Question 23

•	Financing Activities:

Accepted Answer

Cash flows that result in changes to the size and composition of the contributed equity and borrowings of the entity.

Question 24

•	Capital Introduction:

Accepted Answer

Cash injected into the business by the owner(s).

Question 25

•	Drawings:

Accepted Answer

Cash taken out of the business by the owner(s) for personal use.

Question 26

•	Loan Proceeds:

Accepted Answer

Cash received from taking out a new loan.

Question 27

•	Loan Repayments:

Accepted Answer

Cash paid to reduce the principal amount of a loan. (Note: Interest paid is often classified as an operating activity in NCEA Level 3; be sure to check specific assessment requirements).

Cashflow Statements

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