Statement of financial position and Inventory Flashcards
(14 cards)
How can one define “the statement of financial position”
It can be defined as a statement of a business’s assets, liabilities, and net worth.
It is also seen as a “snapshot” of a business’s financial position at a particular point in time.
What is the main purpose of the statement of financial position?
To show a business’s stability or long-term position.
Where can the information for your statement of financial position be sourced from?
Can be sourced from your trial balance.
True or false:
“There are many formats for the statement of financial position.”
Tab
Which is the primary format for the statement of financial position?
Assests = Owner’s equity + Liabilities
Name two sections of statement of financial position:
~ Owner’s equity
~ Liabilities
True or false
* A vat control balance could be either an asset or liability
True
True or false
* Inventory values are regarded as fixed assets
False
True or false
* A bank balance could be either an asset or liability
True
True or false
* Amounts have to be rounded off to the nearest rand before being recorded on the statement of financial position
False
What is the purpose of the inventory systems?
~ To ensure that your inventory levels are maintained
~ To ensure that your inventory does not go missing.
What are the two types of inventory systems that can be used?
~ Integrated inventory also known as the perpetual inventory system
~ Partially integrated system also known as the periodic system
Why is the partially integrated system not effective?
It is not effective system to use when you need to know your inventory valuation and quantities at given time. With this system, you would need to manually calculate what the inventory levels are and the value of the inventory.
How do you calculate cost of sales when it comes to inventory?
COST OF SALES = Opening stock - closing stock + purchases
