Seminar 2 Flashcards
how is the p&l statement structured?
sales - cost of sales = gross profit
gross profit - overheads = operating profit
operating profit - interest & tax = profit for the period
what are the 5 conventions?
prudence
business entity
going concern
dual aspect
historic cost
is depreciation an overhead expense or a non-operating expense?
it’s an overhead because it’s an accounting method that allocates the loss in value of fixed assets over time
fixed assets are essential for day to day operations, therefore depreciation is an operating expense
what are examples of non-operating expenses?
interest & tax expenses
what is the accounting equation?
assets = claims
what are claims?
equity & liabilities
what is the expanded accounting equation?
assets = equity + liabilities
what are the two types of assets?
current / non-current
what is the structure of a statement of financial position (sofp)?
title (company name, type of statement, date)
assets (non-current, current, total assets)
equity & liabilities (equity, non-current liabilities, current liabilities, total equity & liabilities)
what are examples of current liabilities?
trade payables, wages & salaries costs, heat & light, overdraft
in a balance sheet, do tangible or intangible assets come first?
tangible assets first, then intangible assets
tangible assets ___ over time
intangible assets ___ over time
tangible assets depreciate
intangible assets amortise
