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Flashcards in General Extra Deck (24)
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1
Q

Income statement

A

Flows of wealth

2
Q

Cash flow

A

Flows of cash

3
Q

Balance sheet

A

Financial position at a moment in time

4
Q

Asset questions

A

Is there a probable future economic benefit?

Does the benefit arise from past events?

Is there a right to control the resource?

Can the resource be measured in financial terms?

Yes= asset

5
Q

Examples of assets

A

Property

Equipment

Fixtures

Patents

Receivables

Investments outside the business

Inventories

Cash

6
Q

Accounting equation

A

Assets = equity + liabilities

7
Q

Introducing more funds by the owner will increase

A

Equity

Cash in bank

8
Q

Increase in assets = increase in equity

A

Wealth generated as a result of trading will be to benefit of the owners and will increase their stake in the business

9
Q

Loss arising from trading will

A

Reflect in reduction in equity of owners

10
Q

Any funds introduced or withdrawn by the lender will

A

Affect equity

Withdrew 1500 for own use, equity reduced by 1500 and cash by 1500

11
Q

Current liability examples

A

Trade payables

Bank overdraft

12
Q

Non current liabilities

A

Long term borrowing

13
Q

Order of assets in statement of financial position

A

Furthest from cash to closest to cash

14
Q

Use sub-totals for

A

Non current assets and currents assets

Non current and current liabilities

15
Q

5 uses of budgets

A

Promote forward thinking and Identification of short term problems

Help coordination between sections of business

Motivate managers to better performance

Basis for a system of control

System of authorisation for managers to spend up to a limit

16
Q

Layout of an income statement

A
Revenue
Cost of sales
GROSS PROFIT
Expenses
OPERATING PROFIT
Interest
PROFIT FOR PERIOD
17
Q

Rent paid in advance

A

Not shown in income statement

Shown in prepaid in balance sheet

18
Q

Cash flow statement layout

A

Opening balance
Cash in
Cash paid
Closing balance

19
Q

Net present value

A

Total PV- initial cost

20
Q

Discount factor

A

1/(1+r)^t

21
Q

Future value

A

CF x (1+r)^t

22
Q

CF
t
r

A

Cash flow
T = time period
R= rate

23
Q

Gross profit

A

Sales revenue- cost of sales

24
Q

Present Value

A

PV = CF/(1+r)^t