12) UNIT 2 - Final Accounts

Question 1

describe the purpose of final accounts

Answer 1

1) It is a LEGAL OBLIGATION - e.g plc’s must publish final accounts
2) Shows the profit and losses made by a business
3) Shows the value of a business at a particular point in time

Question 2

list the 2 types of final accounts and their purpose

Answer 2

the income statement - shows profit and losses made by a business

the statement of financial position - shows the value of a business at a particular point in time

Question 3

what are the 2 parts of the income statement and their purpose

Answer 3

The trading account: shows the sales revenue and deducts the expenses directly related to the production of your product (GROSS PROFIT)

The profit and loss account: deducts all other expenses from the gross profit to find PROFIT OF THE YEAR

Question 4

Describe the following:

• revenue
• gross profit
• profit of the year

Answer 4

revenue/sales: the money the business receives from selling its goods/services to customers

gross profit: money left when all expenses directly related to the production of goods have been deducted from sales revenue

profit of the year: money left when all expenses have been deducted from sales revenue

Question 5

describe the following with named examples:

• current assets
• non-current assets
• current liabilities
• non-current liabilities

Answer 5

• current asset: value will change within 12 months (e.g stock, cash, deptors)
• non-current assets: value will change after 12 months (e.g. buildings, cars, equipment)
• current liabilities: must be paid withing a year (e.g. creditors, overdrafts)
• non-current liabilities: are paid over more than a year (e.g. mortgage, debentures)

Question 6

List the 3 main areas of the statement of financial position

Answer 6

• assets
• liabilities
• financed by

Question 7

name an example of assets that tend to appreciate in value

Answer 7

buildung

Question 8

name an example of assets that tend to depreciate in value

Answer 8

vehicles