3.4 Flashcards
(15 cards)
What is profit or loss/ income statement?
a final account of a business’ profitability over the year
What are the key calculations for income statements?
gross profit = sales revenue - cost of sales (direct costs)
profit before interest and tax = gross profit - expenses (indirect costs)
retained profit = profit before interest and tax - tax - interest - dividends
What is a balance sheet?
final account of a business’s assets, liabilities, and equity at a specific time
What is the golden rule of the balance sheet?
Total assets - total liabilities = equity
What are assets?
what the business owns
What are examples of current assets?
cash, debtors, stock
What are examples of non current assets?
property, plant, equipment
What are liabilities?
what the business owes
What are examples of current liabilities?
overdrafts, creditors, short term loans
What are long term liabilities?
long term loans
What is equity?
how the business is financed
What is depreciation?
loss in value of a non-current asset due to usage
What is straight-line method of depreciation?
non-current asset depreciates by same amount every year
What is units of production method of depreciation?
non-current asset depreciates based on actual usage
