Statement Of Financial Position (balance Sheet) Flashcards
What is a statement of financial position (balance sheet ) ?
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
What are non current assets ?
Non current assets are assets that are likely to stay within the business for longer than a year
What are tangible assets and examples ?
Tangible assets are assets that can be touched eg machinery and premises
What are intangible assets and examples ?
Intangible assets cannot be touched eg trademarks , brand name , reputation
What are current assets ?
Current assets are items owned by the business that change in value on a regular basis
4 examples of current assets ?
-inventory / stock
-prepayments
-cash
-trade receivables
What are trade receivables ?
Trade receivables are people who owe the business money
What are current liabilities ?
Current liabilities are items owed by a business that should be paid back within a year
What are 3 examples of current liabilities ?
-overdraft
-accruals
-trade payables (creditors)
Current liabilities - overdraft ?
Overdraft - is money borrowed in excess of your current account balance
Current liabilities - accruals ?
Accruals - when an expense is paid after the period to which it relates
Current liabilities - trade payables (creditors )
Trade payables (creditors ) - people the business owes money to for goods / services received but not yet paid for
What are non current liabilities ?
Non current liabilities - debts owed by the business that take longer than a year to repay eg bank loan , mortgage
What are the 3 adjustments that have to take into account on the statement of financial position ?
-depreciation
-prepayments
-accruals
Adjustments on statement of comprehensive income - depreciation ?
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
Adjustments on statement of comprehensive income - prepayments ?
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
Adjustments on statements of comprehensive income - accruals ?
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
What are 4 ways to analyse balance sheet / statement of financial position ?
- 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
What are intrafirm comparisons ?
Intrafirm - different aspects within the same business eg sales from one branch compared to another
What are interfirm comparisons ?
Interfirm comparisons are comparing how the business is performing compared to their competitors eg sales from Sainsbury’s compared to Tesco
What are some limitations of the statement of financial position ?
-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
