Financial Statements

Question 1

What is an income statement used for?

Answer 1

To find out how much wealth was generated

Question 2

What’s a financial position used for?

Answer 2

To find out accumulated wealth at end of period and what from the wealth is in

Question 3

Income statement compares

Answer 3

Cost and sales revenue

Question 4

Financial position looks at

Answer 4

All assets

Question 5

Income is

Answer 5

value of goods sold at selling price

Question 6

Asset is

Answer 6

an item owned by business

1) for future use within business
2) which will be converted to money as part of day-to day trading activities e.g. pre-purchase

Question 7

Liability is

Answer 7

amounts owed to people other than the owners e.g. laons

Question 8

Capital is

Answer 8

Amount o money owed by business to owner (initially = money invested by owner)

Question 9

Dividends

Answer 9

Amounts taken out of the business by the owner for their own use

Question 10

Trade Receivables (Debtors)

Answer 10

Person who owes money to business

Question 11

Trade Payables (Creditors)

Answer 11

We owe money to them

Question 12

Inventory (Stock)

Answer 12

Goods/raw materials for sale

Question 13

Why double entry

Answer 13

All transactions involve giving and receiving

Question 14

3 scenarios in double entry

Answer 14

1. 2 items increasing
2. 1 up, 1 down
3. 2 decreasing

Question 15

What are the debit components (and how do they change)?

Answer 15

1. Increasing assets
2. Increasing expense
3. Decreasing liability

Question 16

What are the credit components (and how do they change)?

Answer 16

1. Decreasing assets
2. Increasing liability
3. Increasing sales
4. Increasing capital

Question 17

Gross Profit =

Answer 17

Sales + Opening stock + purchases - closing stock

Question 18

To calculate cost of goods sold in that year you have to find

Answer 18

Opening and closing inventory

Question 19

Net profit =

Answer 19

Gross profit + Other income - Expense

Question 20

What is not included in income statement?

Answer 20

Non-current assets

Question 21

What are some examples of non-current assets?

Answer 21

Bank, creditors, debtors, furniture, fitting, retained earnings, share capital, vehicle

Question 22

What is the general layout of income statement?

Answer 22

3 columns - 1) categories 2) Debit 3) credit

Categories: 
Sales
Less: Cost of Sales
Opening Stock
Purchases

Less: closing stock

Gross Profit

Less:expenses

Net Profit

Question 23

What is the general layout of financial position?

Answer 23

Columns: assets, debit, credit

Assets:
Fixed
Current

Current liabilities
Equity

Question 24

What are current assets?

Answer 24

Stock, debtors, bank

Question 25

Retained earnings is

Answer 25

Last years + Net profit

Question 26

Liabilities -

Answer 26

creditors

Question 27

Equity is

Answer 27

share capital, retained earnings

Question 28

Depreciation and bad debt are

Answer 28

expenses

Question 29

Prepayments fall into

Answer 29

current assets

Question 30

Accruals fall into

Answer 30

liabilities

Question 31

How does the statement structure change with new information?

Answer 31

Cost, Acc. depreciation, NBV

Question 32

Account depreciation includes

Answer 32

Current liabilities - accruals ( bad debt) Total liabilities

Question 33

Loans are

Answer 33

Non-current liabilities