Definitions of components of financial statements

Question 1

Revenue

Answer 1

Sales (trading entity), Fees Received (service entity)

Question 2

Other Income

Answer 2

All other revenues/income and gains
Examples (not limited to): interest received, dividends received, rent received, commission received, gain on sale of an item of property, plant and equipment

Question 3

Distribution Costs

Answer 3

Distribution costs are expenses incurred in transferring ownership of finished goods to the consumer. Those expenses incurred through the promotion, storage, selling and delivery of the inventory for sale.
Examples (not limited to): Advertising, Sales Salaries/Wages, Vehicle Expenses, Shop Electricity, Shop Rent, Depreciation on Shop Fittings, Depreciation on Vehicles, Delivery Expenses

Question 4

Administrative Expenses:

Answer 4

Administrative expenses are costs associated with the administration of the entity as a whole
Examples (not limited to): Office Salaries/Wages, Rent, Insurance, Depreciation on Office Equipment, Telephone, Accountancy Fees, Discount Allowed (to debtors), Bad Debts, Doubtful Debts
Note a decrease in the allowance for doubtful debts is shown as a credit (negative expense) in administrative expenses.

Question 5

Finance Costs:

Answer 5

Finance costs arise from an entity financing its operations from external sources. Finance Costs are limited to different types of interest paid.
Examples: Interest on overdraft, Interest on Loan, Interest on Mortgage.

Question 6

Investments

Answer 6

All investments, such as shares, government stock, term deposits will be classified as non-current assets. Investments will be stated at cost in the Statement of Financial Position.

Question 7

Non-current liabilities

Answer 7

All liabilities that are not current.

Question 8

Non-current assets

Answer 8

All assets that are not current.

Question 9

Current assets

Answer 9

All assets that will be turned into cash or used up within the next accounting period.

Question 10

Current liabilities

Answer 10

All liabilities that will be repaid within the next accounting period.

Question 11

Property, plant and equipment

Answer 11

Are tangible items that are held for the use in the production or supply of goods and services, rental or administration.

Question 12

Equity

Answer 12

Residual value of the assets after deducting liabilities e.g. A-L=EQ.

Question 13

Intangible

Answer 13

These generate income over future accounting periods but cannot be physically touched e.g. Goodwill, Patients, Trademarks, Copyright.

Question 14

Cost of goods sold

Answer 14

Are expenses in getting the goods into the store.