Lecture 2 Flashcards
what is IAS1?
sets out overall requirements for the presentation of financial statements
sets out guidelines for their structure and content
requires an entity to present a complete set of financial statements at least annually
what is a complete set of financial statements?
SOFP
P&L
SOCE
SOCF
Notes explaining what occurred
what is the accounting equation?
assets = liabilities + equity
how does profit/loss fit into the accounting equation?
assets = liabilities + profit/loss + equity
why is profit/loss positioned the way it is in the accounting equation?
profit/loss is classed as retained earnings/accumulated deficit
it is added to owners equity
what are the classifications for assets/liabilities
current/non-current
net assets = ?
assets - liabilities
what is the operating cycle for current assets?
inventories
trade receivables
cash
what are the characteristics of current assets?
held for sale/trading purposes
expected to be sold within 1 year
what are claims?
liabilities & equity
what are current liabilities?
obligations expected to be settled within 1 year
what is the standard SOFP structure?
assets
- non-current/current assets
- total assets
equity & liabilities
- equity
- non-current/current liabilities
- total equity & liabilities
what is the SOFP’s purpose
show how the business is financed & how funds are deployed
performance can be better assessed
show relationships between assets & claims
examples of intangible assets
goodwill & brands
human resources
monetary stability
reputation
what is the structure of the p&l statement?
sales revenue - cost of sales = gross profit
gross profit - operating expenses = operating profit
operating profit - interest payable + interest receivable = profit for the period
