Assets Flashcards
What are the belongings or possessions of a business called?
Assets
What are non-current assets also known as?
Fixed assets
What is the lifespan of non-current assets?
Relatively long lifespan (+12 months)
What is the nature of non-current assets?
Permanent in nature
What are non-current assets bought for?
Use and not resale or earns interest
Give examples of non-current assets.
- Land & building
- Vehicles
- Equipment
- Financial assets (fixed deposit)
What is the definition of current assets?
Converted to cash within 12 months or less
How do current assets fluctuate?
Fluctuates in value throughout the year
What do current assets consist of?
Cash or items bought for resale to convert to cash within 12 months
How are current assets placed in order?
Order of liquidity
What are the most liquid assets in the context of current assets?
Last on the list
What is inventory/trading stock?
Goods (merchandise) bought with the aim of selling it for profit
Inventory represents the unsold goods that are available for sale.
Who are debtors?
People/businesses that owe your business money based on goods sold or services rendered to them on account (on credit)
Debtors are crucial for understanding a business’s cash flow.
What is a savings account?
Refers to money transferred to a separate account to accumulate interest over a long period
Savings accounts are typically used for long-term savings.
What does ‘bank’ refer to in a business context?
Refers to the money the business has in its current bank account. This is not profit
The bank balance is part of the business’s liquidity.
What is petty cash?
A small amount of cash money kept in a box for small purchases
Petty cash is used for minor expenses that do not require a formal invoice.
What is a cash float?
The money/change in the cash register used to give customers change
A cash float ensures that there is enough cash available for daily transactions.
Fill in the blank: Cash is calculated as _______.
Savings account + Bank + Petty cash + Cash float
This formula summarizes all forms of cash available to a business.
