Balance sheets Flashcards
What are the 2 types of assets?
Current and non-current.
What are non-current assets?
Long term assets such as machinery (commonly used for more than a year).
What are current assets?
Items such as raw materials and cash in the bank which are converted into cash by the end of the financial year.
Give 4 examples of non-current assets.
- machinery
- equipment
- factories
- vehicles
Give 5 examples of current assets.
- cash
- money in the bank
- raw materials
- unsold goods
- receivables (money owed by customers)
Define tangible assets.
Assets which exist physically such as vehicles.
Define non-tangible assets.
Assets which do not exist physically e.g. a firm’s trademark such as the nike tick.
Define shareholders equity.
Money invested in the firm by shareholders in order to acquire the assets needed for trading.
Why is shareholders equity considered a liability?
Money invested by shareholders is technically ‘owed’ to them.
State 3 major liabilities.
- equity
- non-current liabilities
- current liabilities
Define non-current liabilities.
Money owed to banks, financial institutions, groups and individuals that is repaid over a period longer than a year.
Give 3 examples of non-current liabilities.
- bank loans
- mortgages
- debentures
Define current liabilities.
Debts of the firm owed to banks, financial institutions, groups or individuals repaid within a year.
What are common current liabilities?
- overdrafts
- payables
What two things should always balance on a balance sheet?
Total assets and total liabilities.
