Accounting Principles

Question 1

What is a balance sheet?

Answer 1

• contains a company’s assets, liabilities, and equity at a specific point in time.
• it can be used to assess its financial position or health.

Question 2

What is a cash flow statement?

Answer 2

• shows cash movements into and out of a company over a specific period.

Question 3

What is a profit and loss statement?

Answer 3

• shows income and expenditure of the company over a specific period, culminating in the net profit or loss made.
• contains total revenue minus cost of goods, equals gross profit, minus operating expenses, equals not profit.
• This statement can be used to calculate the company’s profit margin.

Question 4

What is an income statement?

Answer 4

The same as a profit and loss statement:
- shows income and expenditure of the company over a specific period, culminating in the net profit or loss made.
- this statement can be used to calculate the company’s profit margin.

Question 5

What is equity?

Answer 5

• the value an owner has in a business, calculated by deducting total liabilities from total assets on a balance sheet.