12) UNIT 2 - Final Accounts Flashcards Preview

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Flashcards in 12) UNIT 2 - Final Accounts Deck (8)
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1
Q

describe the purpose of final accounts

A

1) It is a LEGAL OBLIGATION - e.g plc’s must publish final accounts
2) Shows the profit and losses made by a business
3) Shows the value of a business at a particular point in time

2
Q

list the 2 types of final accounts and their purpose

A

the income statement - shows profit and losses made by a business

the statement of financial position - shows the value of a business at a particular point in time

3
Q

what are the 2 parts of the income statement and their purpose

A

The trading account: shows the sales revenue and deducts the expenses directly related to the production of your product (GROSS PROFIT)

The profit and loss account: deducts all other expenses from the gross profit to find PROFIT OF THE YEAR

4
Q

Describe the following:

  • revenue
  • gross profit
  • profit of the year
A

revenue/sales: the money the business receives from selling its goods/services to customers

gross profit: money left when all expenses directly related to the production of goods have been deducted from sales revenue

profit of the year: money left when all expenses have been deducted from sales revenue

5
Q

describe the following with named examples:

  • current assets
  • non-current assets
  • current liabilities
  • non-current liabilities
A
  • current asset: value will change within 12 months (e.g stock, cash, deptors)
  • non-current assets: value will change after 12 months (e.g. buildings, cars, equipment)
  • current liabilities: must be paid withing a year (e.g. creditors, overdrafts)
  • non-current liabilities: are paid over more than a year (e.g. mortgage, debentures)
6
Q

List the 3 main areas of the statement of financial position

A
  • assets
  • liabilities
  • financed by
7
Q

name an example of assets that tend to appreciate in value

A

buildung

8
Q

name an example of assets that tend to depreciate in value

A

vehicles