Statement of financial position Flashcards
what is a statement of financial position
lists the assets liabilities and equity if an organisation providing a snapshot of the financial condition of a business as of a specific date
what is the basic accounting equation
assets = liabilities + equity
what are assets
resources a business owns or controls
provide future services or benefits
cash inventory equipment or trade receivables etc
what are liabilities
claims against assets
creditors
tarde payable, notes payable, salaries and wages payable etc
equity
basically means the net worth of the business
the amount of money the owner of an asset would be paid after selling it and any debts associated with the asset were paid off
what is equity made up of
share capital and retained earnings
what makes up retained earnings
revenues, expenses, dividends
what increases equity and what decreases It
increase
investment by shareholders and revenues
decrease
dividends to shareholders and expenses
what’s the difference between revenue and profit
revenue is the money a business earns by selling a product or service and profit is the money a business has after accounting for all the expenses involved in generating the revenue
how do you calculate the profit for the year
revenue - expenses
what are the two assumptions when seeing if a transaction should be recorded
monetary unit
economic entity
what is the monetary unit
the transaction needs money value must be able to be converted into pounds
what is economic entity
must Related to the company can not be linked to the activities of the owner need to be for the company
what comes under assets
cash
assets receivable
supplies
equipment
what comes under liabilities
accounts payable and share capital
