Statement of Financial Position Flashcards
Statement of Financial Position
Provides a snapshot of the net worth of a business at a particular moment in time, normally at the end of the financial year. It is a summary of everything owned by a business (assets) and everything it owes (liabilities)
Non-Current Assets
Items of value that are owned by the business and likely to be held for more than one-year e.g premises and fixtures and fittings
Current Assets
Items of value that are owned by the business whose value is likely to fluctuate regularly e.g. inventories, trade receivables, prepayments, cash in the bank and cash in hand.
Current Liabilities
things owed by the business that must be repaid within 12 months e.g overdrafts, accruals, and trade payables
Non-Current Liabilities
Things a business owes that will take longer than one year to repay e.g. mortgages and bank loans
Depreciation
Accounting concept used to spread the cost of an asset over its useful life. Assets appear on the statement of financial position at a realistic value (net book value) and the annual monthly amount by which the assets are depreciated is included as an expense on the statement of comprehensive income
Straight-Line Depreciation
Asset is depreciated by a set amount each year
Reducing Balance Depreciation
Asset is depreciated by a set % of its remaining value each year. The percentage will be set by a senior account and means that the asset will be depreciated by a lower amount as it ages
Net Book Value Formula
Cost - Depreciation
Net Current Assets Formula
Current Assets - Current Liabilities
Net Assets Formula
(Non-Current Assets + Net Current Assets) - Long Term Liabilities
Capital Employed Formula
Opening Capital + Profit For The Year Less Drawings
Balance Sheet
Net Assets = Capital Employed
