Definitions

Question 1

What is an Asset?

Answer 1

A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Question 2

What does non-current mean? And current?

Answer 2

Expected to be held / owed for more than 12 months

Not expected to be held / owned for more than 12 months

Question 3

Difference between tangible and non-tangible asset

Answer 3

Non-tangible = Identifiable non-monetary asset without physical substance
An asset you cannot touch, which can be separated from the organisation as a whole

Tangible = An asset held for use in the production or supply of goods, for rental to others, on for administrative purposes; and is expected to be used during more than one period
an asset you can touch and that is used in day-to-day activities of the organisation, but not sold to generate revenue

Question 4

Define cash

Answer 4

Amounts held in the bank that can be readily converted to cash

Question 5

Define trade recievables

Answer 5

These arise when an organisation makes sales or provides a service on credit. Total value of trade receivables represents the amount of sales which have note yet been paid for by customers.

Question 6

What are prepayments?

Answer 6

Expenses which relate to the following period and have been paid in advance

Question 7

Define inventory

Answer 7

Items the company is holding to sell to its customers

Question 8

Define liabilities

Answer 8

A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits

Something that is owed by the company that can be settled by handing over an asset

Question 9

Define Loan

Answer 9

Amounts due to a bank or financial institutions.

Question 10

Define provisions

Answer 10

A liability of uncertain timing or amount

An amount owed where you are not certain of the amount or if and when it will be paid

Question 11

Define trade payables

Answer 11

Liabilities to pay for goods or services that have been received or supplied and have been invoiced or formally agreed with the supplier

amount owing to the organisations suppliersI

Question 12

Define accruals

Answer 12

Expenses which have been occurred in the period but have not yet been invoiced to the entity

Question 13

When would you make an expense accrual?

Answer 13

When expenses have been incurred for which we have not yet received an invoice from a supplier

Question 14

When would you make a revenue accrual?

Answer 14

When goods and services have been delivered for which we have not yet billed the customer

Question 15

Define overdraft

Answer 15

Amounts due to a bank or financial institutions, usually payable back on demand

Question 16

Define equity

Answer 16

The residual interest in the assets of the entity after deducting all its liabilities.
The organisation’s obligation to its owners.

*SIMPLE TERMS: If a company sells all its assets and usese that money to pay off what it owes, whatever is left over is the equity.

Question 17

How is equity calculated?

Answer 17

Assets - Liabilities

Question 18

Define share capital

Answer 18

The nominal value of the shares issued within equity of an entity

The sum of money raised by a company through the issue of ordinary shares(

Question 19

Define Revaluation Reserve

Answer 19

Any increase in the value of non-current assets which are not due to be sold. Note: Revaluing fixed assets up is an accounting choice and not required under IFRS.

Question 20

Define retained earnings

Answer 20

Equity that is generated from accumulated profits over time.

Question 21

Define income

Answer 21

An increase in equity that results from an increase in assets or a decrease in liabilities, other than from contribution from equity participants.

Question 22

Define revenue

Answer 22

The gross inflow of economic benefits during the period arising from the course of the ordinary activities of an entity.

Question 23

Define expenses

Answer 23

Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.

Question 24

Define costs of sales

Answer 24

Expenses directly attributed to the sales

Question 25

Define operating expenses

Answer 25

Expenses which relate to the operating activity of the company; staff, rental, depreciation, and amortisation expenses.

Question 26

Define gross profit

Answer 26

The profit after deducting the costs associated with making and selling its products or service

Question 27

Define operating profit

Answer 27

Represents the profit after deducting all operating expenses

Question 28

Define profit before tax

Answer 28

Represents profit after deducting all expenses, except tax

Question 29

Profit for the year

Answer 29

Represents the final profit figure, after deducting all expenses from revenue.

Question 30

What is the statement of financial position?

Answer 30

It provides a snapshot of a company’s financial standing at a specific point in time. It includes:
-Assets
-Liabilities
-Equity

Gives a clear view of what the company owns, owes and what is left over for the owners at any point in time.

Question 31

What is a statement of profit and loss?

Answer 31

Shows a company’s financial performance over a specific period.