Statement of financial position Definitions Flashcards
What is a statement of financial position?
This presents a snapshot of the financial position of the business at a specific moment in time. It summarises the assets and liabilities of a business.
What equation does the statement of financial position use?
It uses the accounting equation (Assets - Liabilities = Capital +/- Profit/Loss - Drawings).
What is an Asset?
An asset is something owned or controlled by a business and used within the business.
What is a Non-current asset?
An asset which is to be used long-term in the business and not part of trading activities.
What is a Current asset?
A short-term asset which is to be used in the future.
What is the difference between a Non-current asset and a Current asset?
Non-current: long-term and not part of trading activities, Current: short-term and is to be used in the future.
What is a Receivable?
An example of a current asset, this is someone who owes the business money.
What is a Liability?
An amount owed by the business (an obligation to pay more money at a future date).
What is a Non-current liability?
An amount due to be paid over a long-term (more than 12 months).
What is a Current liability?
An amount due to be paid in the short-term (less than 12 months).
What is the difference between a Non-current liability and a Current liability?
Non-current: long-term payment (more than 12 months), Current: short-term payment (less than 12 months).
What is a Payable?
An example of a current liability, this is someone the business owes money to.
What is capital?
This is where the owner invests resources in the business, which is owed back to the owner and is therefore a type of liability.
What are drawings?
These are amounts withdrawn by the owner for their own personal use.
