Statement Of Financial Position Flashcards
What is an asset?
Possessions of the company or economic resources that produce future benefits.
What is capital?
Owners money, also known as equity. Equity represents shareholders residual claim to the entity’s assets.
What is liability?
Present obligations, resulting in an outflow of economic benefits. In simple terms, something you owe back.
What is the accounting equation?
Assets = Liabilities + Equity
What is the S.O.F.P?
Documentation showing the possessions of the company and where they came from.
What is accounts receivable (asset)?
When the business will receive money in the future, also known as debtors.
What is accounts payable (liability)?
When something has been bought but will be paid in the future, also known as creditors.
Factors that increase capital:
- Additional investment.
- Profits.
Factors that decrease capital:
- Withdrawals.
- Loss.
What is the formula for profit?
Profit = sales revenue - expenses
What is income?
Increases in economic benefits.
What are expenses?
Decreases in economic benefits.
What are non-current assets?
Anything that is held longer than a year and can be converted into cash.
Examples of current assets:
- Cash
- Short-term investment
- Receivables
- Inventory
- Prepaid expenses
Examples of non-current assets:
- Property, plant and equipment.
- Land.
- Building.
- Computers.
- Intangibles.
- Long-term investment.
