The Financial Statements Flashcards
Types of income:
- Revenue
- Other income -> Income that isn’t revenue. For example, profit on sale of an item of property, plant or equipment. Or Rental income
Types of Expenses
- Cost of Sales (The goods/ service they sell)
- Raw materials
- R&D
- Rent
- Distribution Costs
- Administrative expenses -> Insurance, wages, advertising etc.
- Tax expense
- Finance Costs -> Bank interest
Types of Assets
- Factories
- Inventory
- Cash
- Investments
- Trade receivables
Types of Liabilities
- Overdraft
- Trade payables
- Loan
- Interest payable
- Accruals
Types of Equity
- Share capital
- Share premium
What is a liability?
When it is compulsory for the entity to rightfully transfer an economic resources that they owe. There is an obligation to pay cash, re-pay cash and provide goods and services
What is equity?
The interest that is left in assets after taking away its liabilities
What is the balance sheet equation?
EQUITY = ASSETS – LIABILITIES
What elements would you find under the Statement of Financial Position?
Assets, liabilities and equity
What is a current asset?
It will be sold or consumed within 12 months. The asset is cash or to be used for trading.
Examples of Current Assets
- Cash
- Inventory
- Trade receivables
- Prepayments
Examples of Non-Current Assets
- Property e.g. office building
- Plant and Equipment
- Motor Vehicles
What is a current liability?
Will be settled within 12 months. The liability is used in trading and they can’t defer the payment after 12 months
Examples of current liabilities
- Overdraft
- Trade payables
- Accruals
- Interest payable
Are employees an asset to a business?
No, because the company doesn’t control its employees
