Week 3- Statement of Financial Position Flashcards
What is the accrual basis?
income and expenditure is recognised in the year that it occurs not when cash is received or paid
What is an Asset (technical definition)?
A present ECONOMIC RESOURCE controlled by the entity as a result of past events.
what is an economic resource?
A right that has the potential to produce economic benefits
what is a liability?(technical definition)
A present OBLIGATION of the entity to transfer an economic resource as a result of past events
What is Equity (technical def) ?
The residual interest in the assets of the entity after deducting all of its liabilities
Are SoFP’s produced in the same format by all companies?
Yes
what are non-current assets/Liabilities?
those which the business intends to own/owe at the end of the next financial year.
Are non-current assets/liabilities liquid?
No, they cant be turned into cash quickly
what are current assets/liabilities?
those items which the business expects to have received/paid over the course of the next financial year
are current assets liquid?
More so that non-current assets.
Are most liquid or least liquid assets/liabilities listed at the top?
least liquid
what does equity consist of?
- capital that the owners have added to the business
- share capital which is sold to shareholders
- Profit which the business has made (held in retained earnings account)
- Reserves
how can the ACcounting equation be re-arranged?
A-L= OE
what are intangible assets?
assets that have no material substance eg. goodwill, patents
what are tangible assets?
assets have a material substance eg. land, building and vehicles
what is share capital?
the number of shares issued multiplied by the value of each share
what is share premium?
when each share is issued for an amount greater than its value and then the excess is entered into the share premium account
what are retained earnings?
these are the profits that the business has earned in that have not yet been distributed to shareholders as dividends or reinvested into the business
what is the sum of Net Assets?
Total assets- Total liabilities
does the SoFP show all the assets of the business?
NO
