F Income Statements Flashcards
Who uses income statements?
Stakeholders such as banks, lenders, shareholders, HMRC and investors.
They can obtain information such as profitability, liquidity and efficiency of the business.
Describe an income statement.
It shows the profit made from buying and selling which is known as the gross profit.
It also shows the profit made after expenses are deducted, known as profit for the year.
Describe a statement of financial position.
Shows the items the business owns (assets) and the items the business owes (liabilities).
Shows a snapshot of what the business’s value is at anytime.
Non-current assets
Items which have been owned for over a year
Current assets
Items which have been owned for less than a year
Non-current liabilities
Debts which are paid back in over a year
Current liabilities
Debts which are paid back in under a year
Working equity
The ability for the business to pay back short term debts
Current assets - current liabilities
Net assets
What the business is worth at that time
Non current assets + working equity
Trade receivables
Customers that owe the business money
Trade payables
Suppliers that the business owes money to
