Lecture 1 Flashcards
What are the main financial statements?
- Balance sheet (SoFP)
- Income statement
- Cashflow statement
What are the two types of accounting?
- Financial
- Management
What are the characteristics of financial accounting?
- External
- Standardised
- General
- Backward-looking
What are the characteristics of management accounting?
- Internal
- Customised
- Specific
- Forward-looking
What is another name for the income statement?
Statement of profit or loss
What is a balance sheet / SoFP?
Snapshot of assets & claims on last day of accounting period
What is an income statement?
Tracks revenue, expenses, profit & loss throughout accounting period
What is a cashflow statement?
Tracks cash in & out throughout accounting period
How is profit / loss calculated?
Revenues - expenses
What are the advantages of a sole trader?
- Low costs / admin
- No disclosure requirements
What are the disadvantages of a sole trader?
- Unlimited liability
- NICs & income tax
What are the advantages of a partnership?
- Low costs / admin
- Equal control / profit as negotiated
What are the disadvantages of a partnership?
- Shared but unlimited liability
- Disclosure requirements
What are the advantages of an LLC?
- Limited liability
- Finance options
- Corporation tax & no NICs
What are the disadvantages of an LLC?
- High costs / admin
- Stricter accounting requirements
