Definitions of Components of Financial Statements

Question 1

Revenue/Income

Answer 1

The primary source of income e.g. sales or fees.

Question 2

Sales Returns

Answer 2

A negative income - subtract from sales

Question 3

Distribution Costs

Answer 3

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

Question 4

Cost of Goods Sold

Answer 4

Expenses incurred in acquiring the goods for sale.

Question 5

Administrative Expenses

Answer 5

Expenses are costs associated with the administration of the entity as a whole.

Question 6

Finance Costs

Answer 6

Arise from an entity 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 next 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

Tangible items that:

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

Question 13

Investments

Answer 13

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

Question 14

Intangible Assets

Answer 14

These assets you cannot touch but generate income for the business e.g. goodwill, patents, copyright, trademarks.