An accountant prepares a statement of financial position for a business. In this statement,the equity of the owner was shown next to the liabilities. This confused the owner, who argued: ‘My equity is my major asset and so should be shown as an asset on the statement of financial position.’ How would you explain this misunderstanding to the owner?
01. An accountant prepares a
02. ‘The statement of financial position shows how much a business is worth.’ Do you agree with this statement? Explain the reasons for your response.
03.“When evaluating projects, we’re concerned with only the relevant incremental after-tax cash flows. Therefore, because depreciation is a non-cash expense, we should ignore its effects when evaluating projects.” Critically evaluate this statement.
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