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Financial Accounting > 2. The Statement of Financial Position and Income Statement > Flashcards

2. The Statement of Financial Position and Income Statement Flashcards

1
Q

What does the Statement of Financial Position show?

A

A list of what the company owns, are owed and owes.

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2
Q

What are assets?

A

An economic resource controlled by the business.

What the company owns.

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3
Q

What are liabilities?

A

Anything the company owes.

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4
Q

What is capital?

A

Money owed to the owner.

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5
Q

Where does profit fall under on the Statement of Financial Position?

A

In the capital section.

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6
Q

What are the two main sections of the Statement of Financial Position?

A
  • Assets: Everything the business owns.
  • Capital and Liabilities: Everything the business owes.
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7
Q

What are the two main headings of the assets section in the Statement of Financial Position?

A
  • Non-current assets
  • Current assets
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8
Q

What are non-current assets?

A

Assets the company intends to keep.

Usually when they are intended to be kept for more than a year.

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9
Q

What are current assets?

A

Assets that keep changing.

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10
Q

Where does Land and Buildings sit on the Statement of Financial Position?

A

Assets -> Non-current assets -> Land and Buildings

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11
Q

Where does Plant and Equipment sit on the Statement of Financial Position?

A

Assets -> Non-current assets -> Plant and Equipment

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12
Q

Where do Fixtures and Fittings sit on the Statement of Financial Position?

A

Assets -> Non-current assets -> Fixtures and Fittings

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13
Q

Where does Motor Vehicles sit on the Statement of Financial Position?

A

Assets -> Non-current assets -> Motor Vehicles

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14
Q

Where does Inventory sit on the Statement of Financial Position?

A

Assets -> Current Assets -> Inventory

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15
Q

Where does Accounts Receivable sit on the Statement of Financial Position?

A

Assets -> Current Assets -> Accounts Receivable

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16
Q

Where do Prepayments sit on the Statement of Financial Position?

A

Assets -> Current Assets -> Prepayments

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17
Q

Where does Cash sit on the Statement of Financial Position?

A

Assets -> Current Assets -> Cash

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18
Q

How must capital be shown for a sole trader on the Statement of Financial Position?

A

Must show the following separately:
- Capital at the start of the year
- Profit during the year
- Drawings taken out during the year

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19
Q

Where does Capital at the beginning of the year sit on the Statement of Financial Position?

A

Capital and Liabilities -> Capital -> Capital at ‘date’.

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20
Q

Where does Profit for the year sit on the Statement of Financial Position?

A

Capital and Liabilities -> Capital -> Profit

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21
Q

Where do Drawings sit on the Statement of Financial Position?

A

Capital and Liabilities -> Capital -> Less: Drawings

22
Q

Where do Loans sit on the Statement of Financial Position?

A

Capital and Liabilities -> Non-current Liabilities -> Loan

23
Q

Where do Accruals sit on the Statement of Financial Position?

A

Capital and Liabilities -> Current Liabilities -> Accruals

24
Q

Where do Accounts Payable sit on the Statement of Financial Position?

A

Capital and Liabilities -> Current Liabilities -> Accounts Payable

25
Q

Where do Bank Overdrafts sit on the Statement of Financial Position?

A

Capital and Liabilities -> Current Liabilities -> Bank overdraft

26
Q

What are the three main headings of the Capital and Liabilities section in the Statement of Financial Position?

A
  • Capital
  • Non-current Liabilities
  • Current Liabilities
27
Q

What are non-current liabilities?

A

Liabilities that will still be owed in more than a year from the date on the Statement of Financial Position.

28
Q

What are current liabilities?

A

Liabilities that are payable in less than a year from the date of the Statement of Financial Position.

29
Q

What are Accruals?

A

When money is owed for an expense, but the company has not yet received a bill.

30
Q

What is Inventory?

A

An asset bought by the business with intent to sell.

31
Q

What is accounts receivable?

A

Amount owed to the business by customers.

32
Q

What is Prepayment?

A

A payment made by the business in advance.

33
Q

What is accounts payable?

A

Liability due to suppliers.

34
Q

What section of the Statement of Financial Position is different for a Limited Company and Sole trader?

A

The capital heading.

35
Q

What is sales revenue?

A

Money made from the sale of goods.

36
Q

Where is opening inventory on the Statement of Profit or Loss?

A

Under Cost of sales:

37
Q

Where is purchases on the Statement of Profit or Loss?

A

Under Cost of sales:

38
Q

How is Cost of Sales calculated?

A

Opening inventory + purchases - closing inventory

39
Q

How is gross profit calculated?

A

Sales revenue less cost of sales

40
Q

What does purchases mean in respect to accounting?

A

The purchase of goods for sale.

41
Q

Where is rent received on the Statement of Profit or Loss?

A

Under Other income:

42
Q

Where is interest received on the Statement of Profit or Loss?

A

Under Other income:

43
Q

Give five examples of expenses on the Statement of Profit or Loss.

A
  • Rent
  • Electricity
  • Telephone
  • Wages and salaries
  • Motor expenses
44
Q

How is net profit calculated on the Statement of Profit or Loss?

A

Gross profit + Other income - Expenses

45
Q

What is the trading account when referring to the Statement of Profit or Loss?

A

The section from sales revenue to gross profit.

46
Q

What is Capital Expenditure?

A

Purchase of a non-current asset.

47
Q

In which statement does capital expenditure appear?

A

The Statement of Financial Position

48
Q

What is Revenue Expenditure?

A

The payment of expenses.

49
Q

In which statement does revenue expenditure appear?

A

The Statement of Profit or Loss.

50
Q

What is the Accounting Equation?

A

Increase in net assets = Capital Introduced + Profit - Drawings

51
Q

How are net assets calculated?

A

Assets - Liabilities

Financial Accounting (29 decks)

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