C.2 Statement of Comprehensive Income

Question 1

What is a statement of comprehensive income?

Answer 1

The profits and loss of a business. It is recorded over a year.

Question 2

What is the structure of a statement of comprehensive income?

Answer 2

1. Revenue
2. Cost of sales
3. Gross profit = revenue - cost of sales
4. Expenses
5. Net profit = gross profit - expenses

Question 3

What is a statement of financial position?

Answer 3

A snap shot of a business, a photograph of how much it is worth at that point in time. Both parts of the statement must agree, balance, be the same.

Question 4

What financial information should a statement of financial position include?

Answer 4

1. The financial value of the company

2. How the business has been financed

Question 5

What is in the top half of a statement of financial position?

Answer 5

You calculate how much your business is worth

Question 6

What is in the bottom half of a statement of financial position?

Answer 6

You show where the money has come from to finance your business

Question 7

What is the structure of a statement of financial position?

Answer 7

1. Fixed assets
2. Current assets
3. Current liabilities
4. Working capital/net current assets = current assets - current liabilities
5. Non-current liabilities
6. Net assets = fixed assets + current assets - current liabilities
7. Financed by
8. Total equity - net assets and total equity will be the same value

Question 8

Name five types of capital income

Answer 8

1. Loans
2. Mortgages
3. Shares
4. Owners capital
5. Debentures

Question 9

What are loans?

Answer 9

This is money borrowed from a financial institution normally for a set period of time and for a specific purpose. Interest will be payable on the loan.

Question 10

What are mortgages?

Answer 10

These are long-term loans, normally around 25 years, which are secured against a specific asset, for example a building. Interest will be payable on the mortgage.

Question 11

What are shares?

Answer 11

Like tiny fractions of a company. If you own one, you own a little bit of the company and a proportion of the company’s value.

Question 12

What is owner’s capital?

Answer 12

This is money invested in the business from the owner’s personal savings.

Question 13

What are debentures?

Answer 13

A long-term source of finance. A form of a bond or long-term loan which is issued by the company. The debenture typically carries a fixed rate of interest over the course of the loan.

Question 14

Name five types of revenue income

Answer 14

1. Sales
2. Rent received
3. Commission received
4. Interest received
5. Discount received

Question 15

What are sales?

Answer 15

Money received from selling goods or services. These sales can be either cash or credit.

Question 16

What is rent received?

Answer 16

Money received by a business for renting out a property it owns.

Question 17

What is commission received?

Answer 17

If a business sells a product or service on behalf of another business they get paid a percentage of the final sale value.

Question 18

What is interest received?

Answer 18

The money earned by a business on its savings or lending. E.g. if the business has a positive bank balance they will receive interest payments. If the business lends money to another company or individual then they will receive interest in addition to the repayments.

Question 19

What is discount received?

Answer 19

Sometimes suppliers offer discounts to businesses which pay their debts quickly or when they make large (bulk) orders.