Definitions of Components Of Financial Statements

Question 1

Revenue/Income

Answer 1

Primary source of income e.g. sales or fees

Question 2

Sales Returns

Answer 2

A negative income - Subtract form sales -

Question 3

Distribution Costs

Answer 3

Expenses incurred in transferring ownership of finished goods and service to the consumer. Those expenses incurred through the promotion, storage, selling and delivery of the inventory for sale

Question 4

Costs of Goods Sold

Answer 4

Expenses incurred in acquiring good for sale

Question 5

Administrative Expenses

Answer 5

Costs associated with the administration of the entity as a whole

Question 6

Finance Costs

Answer 6

Finance costs arise financing its operations from external sources. Finance Costs are interest paid on borrowing

Question 7

Current Asset

Answer 7

Asset that will be turned into cash or used up within the net accounting period

Question 8

Non-Current Assets

Answer 8

Any asset that is not a current asset

Question 9

Current Liability

Answer 9

Any liability that must be repaid within the next accounting period

Question 10

Non-Current Liability

Answer 10

Any liability that is not a current liability

Question 11

Equity

Answer 11

The residual interest in the assets of the business after deducting all liabilities.
e.g. A - L = Eq

Question 12

Property, plant and equipment

Answer 12

Are tangible items that:

• Are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and
• Are expected to be used during more than one period.

Question 13

Adv. Current Liability

Answer 13

A entity shall classify a liability as current when:

• It expects to settle the liability in its normal operating cycle;
• It holds the liability primarily for the purpose of trading;
• The liability is due to be settled within twelve months after the reporting period; or
• The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

Question 14

Adv. Current Assets

Answer 14

An entity shall classify an asset as current when:

• It expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
• It holds the asset primarily for the purpose of trading;
• It expects to realise the asset within twelve months after the reporting period; or
• It is cash or a cash equivalent

Question 15

Investments

Answer 15

All investments, such as shares, government stock and term deposits

Question 16

Intangible Assets

Answer 16

These assets you cannot but generate income for the business e.g. good will, patents, copyright and trademarks

Question 17

Other Income

Answer 17

Sources of income that are obtained as a secondary/side objective to the main source of income.