Financial statements Flashcards
what do financial statements do
they monitor profitability
what is an income statement
it shows the success of the business in buying and selling inventory
used to calculate GROSS PROFIT/LOSS and PROFIT/LOSS of the year
what is gross profit
it is the difference between the selling price and
cost price x quantity sold
what is the profit for the year
it is the final profit made after other revenues have been added and costs deducted
what is the statement of financial position
a snapshot of the business at a specific moment which calculates what the business is worth
what does the statement of financial position contain?
- non-current and current assets
- non-current and current liabilities
- equity
shows how the business has been financed and by who, these are long term debts
what are current and non-current assets
they are possessions that have a value and could be sold for cash that lasts more/less than a year.
what are current and non-current liabilities
they are debts owed by the business that must be paid more than/within a year
what is equity
the owners investment in the business
what does the ‘financed by’ section show?
how the business has been financed and by who.
long term debts of the business
