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BM > deck_15726780 > Flashcards

deck_15726780 Flashcards

1
Q

What are final accounts?

A

financial statements of a company at the end of a year.

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2
Q

What are the two types of final accounts?

A

Balance sheet and profit and loss account.

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3
Q

What is the purpose of final accounts to shareholders?

A

The perfomance of the company is important as the company’s profits and revenues are related to the dividends they receive.

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4
Q

What is the purpose of final accounts to managers?

A

Final accounts indicate their perfomance.

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5
Q

What is the purpose of final accounts to employees?

A

The perfomance can be used to asses their job security

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6
Q

What is the purpose of final accounts to governments?

A

To understand whether taxes are paid and ensure that the organisation is not involved in any illegal accounts and practices.

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7
Q

What is the purpose of final accounts to competitors?

A

The can see their relative success/failure, industry benchmark, marketing standing and market power

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8
Q

What is the purpose of final accounts to suppliers?

A

Understand how likely debtors pay back for trade credit.

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9
Q

What is the purpose of final accounts to customers?

A

Understand how profits are distributed and how committed an organisation is to CSR.

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10
Q

What is the purpose of final accounts to pressure groups?

A

To understand if the organisation is involved in any unethical practices.

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11
Q

What is a profit and loss account?

A

Shows an organisations trading activity over a time period. The purpose of a P&L account is to show if the organisation is making a profit/surplus or loss.

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12
Q

What are the three parts of the profit and loss account?

A
  • Trading account
  • Profit statement
  • Appropriation account
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13
Q

What is the purpose of trading account?

A

Shows gross profit(difference between sales revenue and cost of producing/purchasing products sold). Gross profit = revenue - cost of sales. Costs of sales = direct costs(COGS for goods) of products sold. Cost of sales = Opening stock + Purchases - Closing stock

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14
Q

What is opening stock?

A

The cost of raw materials at the start of the trading period. Purchases - the costs of supply/delivery of stocks

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15
Q

What are purchases?

A

The cost of supply/delivery of stock.

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16
Q

What is closing stock?

A

The cost of stock at the end of the trading period

17
Q

What is the profit/loss statement?

As part of the P&L account.

A

Shows net profit. Net profit = Gross profit - Expenses

18
Q

What are expenses?

A

Indirect or fixed costs of production(something that can be controlled).

19
Q

What is the appropriation account?

A

Shows dividends and retained profits.

20
Q

What is a balance sheet?

A

The financial statement of an organisation’s assets, liabilities and capital at a particular point in time. Legal requirements for all companies. 3 parts: Assets, liabilities and equity. Net assets = equity. Sources of finance should balance with how they are spent.

21
Q

What are assets?

A

items of property owned by an organisation.

22
Q

What are current assets?

A

Short-term liquid assets that last for up to one year.

23
Q

What are non-current assets?

A

Long term assets that last for more than one year.

24
Q

Formula for total assets?

A

Total assets = current+non-current assets

25
Q

What are liabilities?

A

Money owed by the organisation to its suppliers and lenders

26
Q

What are current liabilites?

A

Short term debts that are paid for within one year.

27
Q

What are non-current liabilites?

A

Long term debts payable after one year.

28
Q

Formula for total liabilities?

A

Current + Non-current liabilites.

29
Q

Formula for net assets?

A

Total assets - Total liabilities

30
Q

What is equity?

A

Value of all assets if they were liquidated.

31
Q

What are the advantages of balance sheet?

A
  • Quick way to asses financial standing at any point in time
  • Helps to make sure all assets and liabilites are accounted for
  • Good way to check equity and net balance and how much an organisation is worth
32
Q

What are the disadvantages of balance sheet?

A
  • Static snapshot, not a representation of reality
  • Somewhat inaccurate: hard to know the real market value of assets
  • Has some room for inaccuracies and manipulation

BM (12 decks)

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