lecture 1 - balance sheet Flashcards
define a baalnce sheet
itemised statement of what a company owns , owes, is owed and is worth
a balance sheet is compose of
assets, liabilities and equity
what is an asset
what one owns
what is a liability
what the company owes, how much and to whom
what does non current mean
long term
owned/owed for more than a year
what does current mean
short term
own/owed for less than a year
a computer is a long term asset most of the time but if the company intends to use it for only 1 year what is it
current asset
what is the useful life
how long a company intends to use an asset for
number of years it is likely to remain in service for the purpose of cost-effective revenue generation
how could a company owe the government
not having paid appropriate tax
in terms of liablities - whether something is short term or long term depends on
when they gotta pay the money back
asset big definiton
Resource controlled by the entity as a result of past events which will yield future economic benefits
how are assets presented in the financial statement
according to the length of time entity expects to hold and use them
non current aset
entity expectws to use for periods that extend beyonf one year
current asset
Cash and other assets that the entity expects to turn to cash within one year (usually in the course of normal operations
what are the 2 types of non current assets
intangible asset
tangible asset
what is a tangible asset and what are they also known as
can be seen and touched e.g property, computer
aka fixed assets
what are intagible assets
-not physical in nature , you can’t see or touch but it’s got value e e.g reputation of the bs (good will) intelleectual property rights such as patent ,
what are the 4 examples of current assets
cash
inventory
trade recievables
prepayment
cash includes
bank deposits
inventory is known as
stock / closing stock value
what is inventory
total value of unsold products at the end of the year . Good purchased or internally produced for purpose of resale or for manufacture of other goods , but not yet sold
trade recievables aka
trade debtors
what are trade recievables
money owed to customers who have bought on credit
what is prepatment
company makes an expense in advance e.g renting a factory and paying rent 1 year in advance
big definition of liability
A present obligation of an entity arising from past events , the settlement of which is expected to result in an outflow of resources that embody economic benefit
what happens if you cant pay a liablity back
go bankrupt
non current liability
entity expects to settle in periods that extend beyond one year #- mortgage on property
what is a current liablity
entity expects to pay it within one year
give example of current liablities
overdraft/short term borrowing
trade payable
accrual
trade payable aka
creditor
what is a trade payable
money owed to supplier who provided goods on creditha
what is an accrual
opposite of prepatment
you owe money for an expense you should pay ( we cover later )
equity aka
capital
what is equity
amount of capital invested in the business by its owners ( net of withdrawals ) + retained profit
equity is a notional amount that can be interpreted as
net investment of the owners
if company is doing well the investment value
increases
what does the equity section show
value of a company
when looking at a balance sheet what should you always do
check the currency and whether the money is in Ks or millions
