Recording Credit Sales Flashcards
What is a financial statement?
The statement of profit or loss and statement of financial position of two key elements of the financial statements
What do you need to categorise in financial statements?
Assets, liability, income, or expenses
What is the statement of financial position?
A Snapchat of the business at one point in time it shows what a business owns and what it owes
What is an asset?
Something that the business owns
What is the liability?
Something the business owes
What is capital?
The amount of money invested by the owner in the business
What does the asset section of the statement of financial position contain?
Contains non-current assets and current assets
What is non-current assets?
They are assets the business will hold for more than one year
What is current asset?
Assets that the business will hold for less than a year
What is liabilities in the statement of financial position?
Liabilities is made up of current liability is which amounts the business owes that must be paid within one year
What’s a non-current liabilities in the statement of financial position?
Announce the business owes that are due to be paid in more than one year e.g. bank loans
What is the capital in the state of the financial position?
The capital section is made up of cash injected by the owner plus the profit the business is made less any drawings the owner has taken
What is the accounting equation used for the statement of financial position?
Assets - liabilities = capital
What does the statement of profit and loss give?
A summary of trading activities over a period of time usually 12 months it shows earnings that a business has received and cost that a business has incurred income less expenses gives the profit the business is generated
What are some examples of income?
Revenue or sales
Interest received, e.g. from bank savings
Rental income
