3.4 Final accounts Flashcards
importance of final accounts
-legal requirement
-allows managers better financial control and planning.
-divide money (stakeholders, employees, taxes)
-financial transparency
Profit and loss account
this reports the revenues and expenses of a business at the end of the specified accounting period
balance sheet
this reports the value of assets and liabilities of a business at a particular point in time
final accounts purpose for different stakeholder groups
shareholders - owners of company want to see where their money went and want return. shareholders can decide to hold, sell or buy more shares
Employees - staff are interested for pay rises, asses job security
managers
competitors
government
financiers
suppliers
potential investors
balance sheet
annual financial statement that all liability companies are legally required to produce for auditing purposes.
Assets
items of monetary value
non-current assets
last longer than 12 months
-property
-plant
-equipment
current assets
last less than 12 months
-Cash
-Debtors
-Stocks
liability
legal obligation to repay lenders and suppliers at a later date
non-current liabilities
debts that are due to be repaid after 12 months
-mortgages
-bank loans
-debentures
current liabilities
debts within a year
-bank overdrafts
-trade creditors
Equity
refers to the value of the business that belongs to the owners
-share capital
-retained earning
net assets=total equity
Intangible assets
nonphysical fixed assets that can earn revenue for a business such as brand names, goodwill, trademarks, copyrights, and patents. legally protected by intellectual property rights
-Branding
-patents
-copyrights
-goodwill
-registered trademarks
branding
drive global sales, indefinite asset as brands stay with company as long as it exists.
Patent
