Statement of Financial Position Flashcards
2 forms of Equity
- Share Ordinary Capital
- Retained earnings
What are retained earnings?
Profits for future use
Revenues - from income statement
Expenses
Dividends
What is ordinary share capital
All shares other than dividens
Equation for profits of the year
Revenue - Expenses = Profit
What is double entry bookkeeping
each transaction has a dual effect on equation
- stuff business owns (assets) = stuff business owes (Liability and equity)
What is the current asset?
Short term Resources business owns or is expected to own in 1 year
e.g Cash, accounts recievable, inventory, prepaid expenses
What is a non-current asset?
Resources a business can’t easily turn into cash and profits for year
e.g long term investments
e.g Property, Plant and equipment
What is current liabilities
Debts a business must pay in a year
e.g accounts payable, salary payable, taxes payable, accrued expenses
What are non-current liabilities?
Financial obligations that businesses aren’t required to pay in a year
e.g long-term lease, pensions benefits, debentures
Business entity
Business is separate from those who contribute capital. This capital contribution and entities made are treated as business owes
Enhancing characteristics if timeliness
Financial info should have this as produced and communicated with users in a good time frame to allow decisions
What is the statement of financial positioning?
A snapshot of business’s assets, liabilities and equity at a single point
Where does Profits come from?
Income statement
what does on account mean?
Pay supplier at a later date, so part of accounts payable
