3.4 Final Accounts Flashcards
Balance Sheet
Contains financial information about an organization’s assets, liabilities and the capital invested by the owners, showing a snapshot of the firm’s financial situation.
Book Value
The value of an asset as shown on a balance sheet. The market value of assets can be higher than its book value because of intangible assets such as the brand value or goodwill.
Cost of Goods Sold (Cost of Sales)
Refers to the direct costs of producing or purchasing stock that has been sold to customers.
Creditors
Suppliers who allow a business to purchase goods and/or services kn trade credit.
Current Asset
Refers to cash or any other liquid asset that is likely to be turned into cash within 12 months of the balance sheet date. Examples include cash, debtors and stocks.
Current liabilities
Debts that must be settled within one year of the balance sheet date. Examples include trade creditors and other short-term loans.
Depreciation
The fall in the value of noncurrent assets over time, caused by wear and tear (due to the asset being used) or obsolescence (out-dated).
Expenses
The indirect or fixed costs of production, such as administration charges, management salaries, insurance premiums and rent.
Final Accounts
The published annual statements that all limited liability companies are legally obliged to report, namely the balance sheet and the P&L account.
Goodwill
An intangible asset which exists when the value of a firm exceeds its book value (the value of the firm’s net assets)
Gross Profit
The difference between the sales revenue of a business and its direct costs incurred in making or purchasing the products that have been sold to its customers.
Historic Cost
Refers to the purchase cost of a particular fixed asset. It is used in the calculations of depreciation.
Intangible assets
Noncurrent assets that do not exist in a physical form but are of monetary value, such as goodwill, copyrights, brand names and registered trademarks.
Net Assets
Show the value of a business to its owners by calculating the value of all its assets minus its liabilities. This figure must match the equity of the business in the balance sheet.
Noncurrent Assets
Items owned by a business, not intended for sale within the next twelve months, but used repeatedly to generate revenue for the organization, such as property, plant and equipment.
