chap 3 theory Flashcards
(16 cards)
define assets
assets are resources a business owns or controls that are expected to provide future benefits
non-current assets are…
non-current assets are used by the business to help generate income. they provide benefits which last for more than one financial year, and they are not easily converted to cash
e.g.s of non-current assets
office equipment, motor vehicles, fixtures and fittings, property, buildings and land
current assets are…
current assets provide benefits which are used within one financial year. they are easily converted to cash
e.g.s of current assets
inventory, trade receivables, cash in hand, cash at bank,
define liabilities
liabilities are obligations owed by a business to others that are expected to be settled in the future
non-current liabilities are…
non-current liabilities are liabilities that have a repayment period of more than one financial year. they are recorded as long-term borrowings in the statement of financial position
e.g.s of non-current liabilities
mortgage loan, bank loan, loan from other lenders
current liabilities are…
current liabilities are liabilities that are due to be paid within one financial year
e.g.s of current liabilities
trade payables, bank overdraft
define equity
equity refers to the claim by the owner(s) on the net assets of a business
(net assets= total assets - total liabilities)
define income and list two facets
income refers to amount earned from business activities.
revenue and other income.
define expenses
expenses are costs incurred in the operation of a business to earn income in the same accounting period
e.g.s of income
sales revenue, service fee revenue, commission income, rental income, interest income, discount recieved
