MT 1 Flashcards
SFP equation and meaning
Statement of financial position
Assets= Liabilities + Equity
Equity= Assets- Liabilities
Three criteria for an asset
-controlled by firm/ entity
-result from past events
-future benefits to company
Three criteria for a liability
-present obligation
-arise from past events
-expected to result in outflow of the entities resources
First three lines of the SFP
Name of company
Statement of financial position
As at current date
Current ratio
=Current assets/ current liabilities
measures liquidity, higher liquidity the higher the number
Quick ratio
=CA-inventory/ CL
measures liquidity, higher liquidity the higher the number
Debt to total assets
=Total liabilities/ Total assets
measures solvency,( ability to repay liabilities) the lower the ratio the higher the solvency
Form of a journal entry
Date
debit account
credit account
description
First three lines of Income statement
Name of firm
income statement
For the month ended (date)
Income statement layout
Revenue
Less: COGS
Operating expenses
Other income/ expenses; gains and losses
Income tax
Net income
First three lines of the statement of changes in equity
Name of firm
Statement of changes in equity
For month ended
Layout of statement of changes in equity
Description Common shares RE Total
Balance
Net income
Dividends declared
Balance at
Gross margin
Gross profit/ Net sales
Operating margin
Operating income/ net sales
Profit margin
Net earnings/ net sales
