Purposes for the Statement of Financial Position Flashcards
What is the purpose of the Statement of Financial Position?
Achieved
To show the Revenue, Expenses and Net Profit for the period for the (insert name of the Business here).
Merit
This allows (insert the user name here) to make decisions about (make up a decision relating to Revenue, Expenses or Profit related to the question)
What are the components of the statement of financial position?
Components
Income – Sales or Fees Other Income Cost of Goods Sold Expenses Distribution Administrative Finance Costs Net Profit
What are the limitations of the statement of financial position?
Does not include non-financial information. E.g. quality of goods or services provided, quality of staff, foot traffic.
Some expenses are based on estimates eg. depreciation, doubtful debts which maybe incorrect and so final profit is inaccurate.