7 - Statement of Financial Performance Flashcards
What is a Statement of Financial Performance also known as?
Income statement; profit and loss statement; statement of comprehensive income
What is the purpose of the income statement?
To measure and report how much profit (wealth) the business has generated over a period.
Define revenue
The gross inflows of future economic benefits gained by the different categories of operating activities(e.g. cash from sales)
What is income made up off?
Revenue (from operating activities) and gains (usually from non-operating activities, e.g. gain on sale of non-current assets.
What is expense?
The outflow of resources to generate income.
How to calculate profit (or loss)?
Income - expenses
How long is the income statement for?
The year
What are the 3 forms of income statements?
Simple Report, Classified Report and Regulatory Report
What is a simple income statement?
Used for smaller organisation, usually just lists the in incomes and expenses in alphabetical or financial magnitude order.
What is a classified income statement?
For larger organisations where income and expenses are grouped into categories
What is a regulatory report?
Required to be produced by companies and other entities in accordance with statutory standards.
What 4 factors are considered for depreciation?
The cost of the asset
The useful life of the asset
The estimated residual value of the asset
The depreciation method
What are the 3 depreciation methods?
- Straight line method
- Accelerated depreciated
- Units of production based depreciation
What is straight line depreciation?
Allocates the amount to be depreciated equally over each year of the useful life of the asset.
EQUAL DEPRECIATION
What is accelerated depreciation?
Applies a fixed percentage rate of depreciation to the written-down value of an asset each year.
Higher annual depreciation is charged in earlier years.
