sofp theory Flashcards
Statement of Financial Position
This shows what the business owns (assets), what it owes (liabilities) and what the business is worth.
Non-Current Assets
This refers to items the business owns for several years e.g. property, fixtures and fittings and motor vehicles.
Aggregate Depreciation
This is the total depreciation to be deducted from the ‘At Cost’ value of a Non-Current Asset.
Current Assets
This refers to items the business owns but for less than one year and their value will constantly change e.g. closing inventory, trade receivables
Closing Inventory
This refers to the stock which is left over at the end of the year. It will become next year’s opening inventory.
Trade Receivables
This refers to money owed to us by customers at the end of the financial year.
Provision for Bad Debts
This is an estimate of the amount of doubtful debt that will have to be written off in a year. It is deducted from trade receivables.
Current Liabilities
This refers to short term debts e.g. anything we owe that should be repaid within a year e.g. trade payables
Trade Payables
This refers to money we owe suppliers at the end of the financial year.
Working Equity
This is the Current Assets total - Current Liabilities total. Working Equity is the amount of cash and other assets a business has available after all its current liabilities are accounted for.
Non-Current Liabilities
This refers to long term debts which the business will take years to repay e.g. loan.
Equity
This refers to the cash invested into the business by the owner.
Profit for the Year
This refers to the final profit to the business before tax is deducted.
Drawings
This refers to cash and inventory taken out of the business for the owner’s personal use.
