Financial Statements Flashcards

1
Q

Whats a non- current asset

A

Non-current assets are assets that are expected to be used by a business for more than a year to help generate income.

(LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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2
Q

Whats a current asset?

A

Current assets are assets that are cash or are expected to generate cash or another economic benefit within 12 months. They therefore include inventory (goods for resale) and receivables (amounts owed by customers for goods or services provided) (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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3
Q

Whats a liability?

A

Liabilities are officially defined as ‘present obligations which are expected to result in an outflow of economic benefits’ ie they are amounts which theoretically have to be paid in cash in the future. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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4
Q

Whats non-current liabilities?

A

Non-current liabilities are amounts which are payable in more than 12 months’ time, such as long-term bank loans.

(LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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5
Q

Whats current liabilities

?

A

Current liabilities are amounts which are payable in less than 12 months’ time, such as an overdraft or trade payables (amounts owed to suppliers for goods or services provided). (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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6
Q

What is the accruals concept?

A

all amounts in the statement of profit or loss must relate to activity in the financial year which it covers. The accruals concept is also known as matching – the income for the period is matched with the expenses that were used to generate that income. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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7
Q

Main financial statements companies

A

• The primary financial statements include:

– Statement of financial position

– Statement of profit or loss

– Statement of changes in equity

– Statement of cash flows (A3a) (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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8
Q

The accounting equation is

A

• The accounting equation can be written as follows:

– Asset – Liabilities = Capital (UK variant)

– Assets = Capital + Liabilities (International variant)

– Assets − Capital = Liabilities (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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9
Q

Assets vs liabilities

A

• Assets are items or amounts owned by a business, whereas liabilities are items or amounts a business owes. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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10
Q

Capital?

A

amounts a business owes. (A3b)

• Capital is a liability of the business to its owner(s). (A3b) (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

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11
Q

What is the prudence concept?

A

States that caution should be exercised when making accounting judgements

Liabilities and losses should not be understated. While assets and profits should not be overstated

This means that all losses whether actual or expected should be recorded at once and in full while profits are only recognised when they actually arise

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12
Q

Fundemental accounting assumptions are

A

Going concern
Accruals
Consistency
Prudence

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