Week 2 Flashcards
Where does equipment go on Statement of profit and loss?
It doesn’t, it goes as a non-current asset on a balance sheet
How do you get retained earnings for SFP?
Takeaway dividends then add net profit from PnL
Where does trade receivables go on Balance sheet?
Current asset
Are trade payables regarding as an operating expense on the statement of profit and loss?
No, they are a current liability
do you inlcude retained earnings in the statement of PnL?
No
What does IASB stand for?
International Accounting Standards Board
What is the IASB conceptual framework?
Standards/rules that guide the development of financial statements
What are the fundamental qualitative characteristics of useful financial information?
Relevance and Faithful representation.
Relevance means it must have: Predictive value and comparative value
Faithful representation means it must be true and be: Neutral, Free from errors, Complete
What does materiality correct mean?
has any information been excluded that would have a detrimental affect on users who are basing their decisions on these reports?
What are the enhancing qualitative characteristics of financial information?
Comparability / Verifiable / Timeliness / Understandability
What does going concern mean?
Financial statements that are prepared under going concern means they are prepared under the assumption that the busienss will continue in operation for the foreseeable future.
Define asset
A resource that is controlled by the entitiy as a result of apst events, from whihc future economic beenfits are expected to flow to the entity
What are the two different types of expenditure?
Capital expenditure = Results in acquisition or enhancement of non-current assets
(ends up on SFP as non-current asset)
Revenue expenditure = Incurred for the purposes of trade
(ends up on PnL as expense)
