Statement Of Financial Position (balance Sheet)

Question 1

What is a statement of financial position (balance sheet ) ?

Answer 1

A statement of financial position (balance sheet ) is a snapshot of a businesses worth at a particular moment , normally at the end of the financial year

Question 2

What are non current assets ?

Answer 2

Non current assets are assets that are likely to stay within the business for longer than a year

Question 3

What are tangible assets and examples ?

Answer 3

Tangible assets are assets that can be touched eg machinery and premises

Question 4

What are intangible assets and examples ?

Answer 4

Intangible assets cannot be touched eg trademarks , brand name , reputation

Question 5

What are current assets ?

Answer 5

Current assets are items owned by the business that change in value on a regular basis

Question 6

4 examples of current assets ?

Answer 6

-inventory / stock
-prepayments
-cash
-trade receivables

Question 7

What are trade receivables ?

Answer 7

Trade receivables are people who owe the business money

Question 8

What are current liabilities ?

Answer 8

Current liabilities are items owed by a business that should be paid back within a year

Question 9

What are 3 examples of current liabilities ?

Answer 9

-overdraft
-accruals
-trade payables (creditors)

Question 10

Current liabilities - overdraft ?

Answer 10

Overdraft - is money borrowed in excess of your current account balance

Question 11

Current liabilities - accruals ?

Answer 11

Accruals - when an expense is paid after the period to which it relates

Question 12

Current liabilities - trade payables (creditors )

Answer 12

Trade payables (creditors ) - people the business owes money to for goods / services received but not yet paid for

Question 13

What are non current liabilities ?

Answer 13

Non current liabilities - debts owed by the business that take longer than a year to repay eg bank loan , mortgage

Question 14

What are the 3 adjustments that have to take into account on the statement of financial position ?

Answer 14

-depreciation
-prepayments
-accruals

Question 15

Adjustments on statement of comprehensive income - depreciation ?

Answer 15

Depreciation
-annual depreciation is shown as an expense on the statement of comprehensive income
-each year depreciation is deducted from the net book value , value of assets are recorded in the statement of financial position

Question 16

Adjustments on statement of comprehensive income - prepayments ?

Answer 16

Prepayments
-a payment is an expense made in advance of the period of which it relates to
-expense is taken out of expenses in statement of comprehensive income and shown as a current asset in statement of financial position

Question 17

Adjustments on statements of comprehensive income - accruals ?

Answer 17

Accruals
-when an expense if paid after the period of which it relates to
-expense is added as an expense in the statement of comprehensive income and shown as a current liability in statement of financial position

Question 18

What are 4 ways to analyse balance sheet / statement of financial position ?

Answer 18

• comparison between figures - eg current assets in relation to current liabilities
  -comparison between years - eg value of non current assets in one year compared with previous years
• intrafirm comparisons - different aspects within a business eg sales from one branch compared to another
  -interfirm comparisons - comparing how the business is performing compared to their competitors

Question 19

What are intrafirm comparisons ?

Answer 19

Intrafirm - different aspects within the same business eg sales from one branch compared to another

Question 20

What are interfirm comparisons ?

Answer 20

Interfirm comparisons are comparing how the business is performing compared to their competitors eg sales from Sainsbury’s compared to Tesco

Question 21

What are some limitations of the statement of financial position ?

Answer 21

-doesn’t hold all the information you might need to assess the performance of a business
-information is based on past data as is only a snapshot of time
-constructed using a range of other financial statements so errors can occur