Statement of Financial Position / Balance Sheet Flashcards
What is bad debt
Expenses which are written off when customers fail to pay their accounts.
What is asset
Something that we own.
What are administrative expenses
Expenses incurred by the business in order to run the business.
What is balance sheet
Statement which shows the value of the business for the owner.
What is an income statement
A statement which is used to calculate the Net Profit of the business for the accounting period.
What is net profit
Revenues less Expenses.
What is the accounting equation
OE = A - L
Owners equity = assets - liabilities
What is liabilities
Money that is owed to other people
What are current assets
These are assets that we can turn into cash quickly, to either pay of our immediate debts or reinvest in our business i.e. Bank, Trade Receivables or Inventory
Accounts Receivable
Inventory
Cash at hand/bank
What are non-current assets
Assets that can be sold for money but will take time and will have to go through legal most of the time
Fittings and Equipment
Buildings
What is equity and what is a part of equity in balance sheet
Equity can be defined as 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. For example, if you own a home that’s worth $200,000 and you have a mortgage of $50,000, the equity in the home would be worth $150,000.
Drawings is neither asset or liability and goes in the EQUITY group.
Opening capital is the exact value given at the top for financial statement
Profit from the income statement go in EQUITY group
Closing capital = net assets = opening
Closing capital = opening capital + (difference between profit and drawings). If drawings are bigger than profit closing capital smaller than opening capital. If profit bigger than drawings, closing capital bigger than opening capital
What are drawings
Drawings are neither assets or liabilities.
Drawings are money taken from the profit of the business for personal use. It is like taking the money from the cash register to go buy things for yourself.
What are current liabilities
Liabilities that have to be paid right now in one go with very little time given
Bank Overdraft - Bank lends too much money over limit so have to buy back fast
Accounts payable - Money borrowed from others so have to return
What are non current liabilities
Liabilities that do not have to be fully paid off in one go and will be given a long time to pay off
Mortgage
Loan
What are rules for balance sheet
Liabilities and assets go on the left
Totals for assets and liabilities go on the right column
Totals for sub categories of assets and liabilities go in the middle column
Equity all goes in the last column
If one category has only 1 item, put its value in the second column for the total of that category
