lec 1 sum Flashcards
financial accounting
organsiation coommunicating financial infor to external sth
managment accounting
org communicating info to internal i.e between dpts
income statement aka
profit and loss acount
what does income statment show
profit or loss made during a particular period
revevnue
money earned from main trading activities
income
money company earns
is intereest from bank account income or revenue
income - as not main trading activity
if an ice cream van makes a sale from ice cream is this revenue or incom
revenue as income earned from the main trading activity
if a company earns something what are they entitled to do
keep it and not give it back
expenses
day to day runing cost of a business
exmaple of revenue expenses
rent
utility bills
wages
heating
cleanning
repairs
discount allowed
depreciation of fixed assets
telephone bills
insurance
lighting
salaries
rates
legal fees
TAX
revenue expenditure is not teh same as
capital expenditure
paying off a liability is not
spendin
anything you can think of in the profit or loss statement is either A
income
or a
loss
what is the accrual concept
expenses and income should be recognisefd as soon as they occur not necessarily when they are recieved
*during the peirod *
profit calc (in terms of income statement)
income - expenses
balance sheet
itemised statement of what one
owes
owns
is worth
asset
what business owns
liability
what business owes
current asset v non current asset
short term thing business is planning to use for up to a year
long term thign business is plannign to use for more than a year
curent and non current liabltiies are made on what basis
how long till busines gotta pay it off
tangible asset
can be seen and touched
what are tangible assets referred to as in BS
Property
Plant
Equipment
intangible asset
cant be seen and touched /not physical in nature -
examples of intangible asset
intellectual property
e.g.
patent
reputaiotn/image - good will
current asset - more in depth
cash and other assets bs expects to turn into cash within one year
state the 4 current assets
cash (includes bank deposits)
inventory ( value of closing stock/goods not sold yet at the end of the year)
trade recievables - money owed to bbusiness by creditors
prepayment - pay in advance
e.g NCL
mortgage
state the 3 current liablities
ST borrowing e.g. overdrafts
Trade Payables - creditors who bs got to pay money back to
Accrual
Capital/Equity
amount of capital invested by owners (net of withdrawals) + retained profit
accounting entity concept -
business and owner treated separately so got to distinguish private and bs transactions
only assets of a business can be recorded as an asset in the balance sheet
Capital equation
CAPITAL = ASSETS- LIABLIITIES
Why does the capital equation make sense
C=A-L
capital is what a firm is worth
assets are money value of what the firm owns
and they use this to pay off liabilities
what is left over goes to the owner
Why does Assets = capital + liabilities make sense
actually i think it is plus
once sell all assets money goes
first to pay off laibliities (internal claim)
the rest goes to capital (external claim)
the opening capital will always …. unless
be there
unless its withdrawn by owner - dont matter if ti was cash and some was taken out
closing capital =
(opening ) profit + capital
ending capital =
opening capital +
additonal capital +
profit (-loss)
-withdrawings
if invest money + also take out loan at the beginnngin how will c = a -l be
asset will be the sum of the money
and capital + liabliities will be equal to assets
basically whatever you start with will be cash
capital =
net assets
if profit increases what happens to capital
increases
