Introduction To Final Accounts - 10% Flashcards
What are the two key statements in the final accounts ?
- statement of profit or loss
- statement of financial position
What is a statement of profit or loss?
It is a record of income generated and expenses incurred over a given period
What is a statement of financial position ?
A list of all the assets owed and liabilities owed at a particular date.
Statement of profit and loss characteristics
This statement matched revenue earned in a period with the costs incurred in earning it
Gross profit calculation
Revenue - cost of sales = gross profit
Profit calculation
Gross profit - expenses = profit
Statement of financial position characteristics
This is the list of assets, liabilities and capital of a business
What is an asset ?
Something valuable which a business owns or has use of
Give 3 examples of an asset
- a factory warehouse
- inventories of good for resale
- Cash
What is a liability ?
Something that is owed to somebody else
Give 3 examples of a liability
- bank loan
- amounts owed to suppliers
- taxation owed to government
What is capital ?
-Funds which belong to the owner/ owners
- the investment of funds with the intention of earning a return
How to calculate capital
- capital contribution
- add profit for the year
- less drawings
What is profit ?
The excess of income over expenditure
What is the accounting equation
Asset= capital + liabilities
What is drawings ?
The amounts withdrawn from the business by the proprietor
What is capital expenditure ?
This results in the acquisition of non- current assets or an increase in their earning capacity
What is revenue expenditure
Incurred for the purpose of trade or to maintain the existing earning capacity of the non- current asset
Which financial statement does the capital expenditure go on ?
Statement of financial position
What’s financial statement does the revenue expenditure go on ?
Statement of profit or loss
Give an example of capital income
- sale of a non current asset
Give 3 examples of revenue income
- sales ( trading income )
- interest received
- dividends received
These all go to the statement of profit and loss
What are the 3 types of coding systems
- numeric code e.g invoice 1307, 1308
- Alphabetical e.g customers filed alphabetically by name
- alpha- numeric e.g codes ABB001, ABB002
What are the 4 advantages of coding systems
- unique identifiers
- saves time
- saves storage space
- used extensively in computer systems
