i: Identify and discuss the key objectives of a Statement of Financial Position and Income Statement, highlighting the key differences between the two statements.
S.O.F.P (Balance Sheet):
On a particular day (snapshot)
New financial position at end of period.
Funds: Share capital and reserves.
Accurate financial position of firm.
Accuracy of accounts is verified.
Indicates if business has sufficient assets to repay its liabilities.
Min net worth at point of time.
Shows profit/loss.
Two sides must always be equal.
Income Statement:
Total revenue during particular period.
Links balance sheet at beginning and end of period.
Income, expenditure, profit, revenue.
Items might be relevant but not reliable.
Some numbers depends on accounting methods or judgements/estimates.
Show managers etc. whether company made or lost money during period.
Indicates how revenue is transformed to net income.

ii: Discuss two fundamental assumptions that underpin the production of these statements using relevant examples.
Going concern: Determines whether the business will exist and continue onto the new financial year, without any fear it’d go into liquidation. This is decided by whether the values of assets are higher than their actual market value. The ‘going concern’ concept supports the idea of when a business buys assets like equipment, land, buildings, it does so with the purpose that these assets will produce income over a number of years and not depreciate in value.
Accruals basis: Assesses the value of assets based on the accounting periods to which they relate to. A method of accounting in which each item is entered as it is earned or incurred regardless of when actual payments are received or made. It provides much more information about your business. It allows you to match revenue to the expenses incurred in earning them, giving you more meaningful