Grade 12 Fundamentals of Accountancy, Business and Management 2 Flashcards

Flashcards testing core concepts, formulas, definitions, and formats across Grade 12 FABM 2 topics including financial statements and analysis techniques.

What is the fundamental accounting equation for the Statement of Financial Position (SFP)?

$$\text{ASSETS} = \text{LIABILITIES} + \text{OWNER'S EQUITY}$$

Why are assets, liabilities, and owner's equity accounts referred to as permanent accounts?

They are called permanent accounts because their balances remain intact from one accounting period to another and are retained in the SFP until their balances become zero.

What are two specific examples of contra asset accounts presented in the Statement of Financial Position?

Allowance for Doubtful Accounts (a contra asset to Accounts Receivable) and Accumulated Depreciation (a contra asset to Property, Plant and Equipment).

What is the structural difference between the Report Form and the Account Form of the Statement of Financial Position?

The Report Form shows asset accounts first followed by liabilities and owner's equity accounts underneath, whereas the Account Form shows assets on the left side and liabilities and owner's equity on the right side.

How are Current Assets defined in the lecture notes?

Assets that can be realized (collected, sold, used up) within one year after the year-end date.

What is the key difference between the inventory accounts of a service company and a merchandising company?

A service company only has supplies inventory under current assets, whereas a merchandising company has supplies inventory plus an additional account called Merchandise Inventory, Ending.

What three items are required in the Heading of a Statement of Financial Position?

i. Name of the Company, ii. Name of the Statement, and iii. Date of preparation (with emphasis on the wording "as of").

How is Net Income computed in a single-step Statement of Comprehensive Income (SCI)?

Net income is computed using a single step: Total Revenues minus Total Expenses.

What three formulas are used to calculate Gross Profit, Operating Income, and Net Income on a multi-step SCI?

$\text{Gross Profit} = \text{Net Sales} - \text{Cost of Goods Sold}$, $\text{Operating Income} = \text{Gross Profit} - \text{Operating Expense}$, and $\text{Net Income} = \text{Operating Income} + \text{Non-Operating Items}$.

How is Net Sales calculated in a multi-step Statement of Comprehensive Income?

Net Sales is calculated as Sales minus Sales returns and Sales discount.

How is the Cost of Goods Available for Sale calculated?

By adding Beginning inventory to the Net cost of Purchases.

What distinguishes General and Administrative Expenses from Selling Expenses?

General and Administrative Expenses are not directly related to the merchandising function but are necessary to operate the business effectively, whereas Selling Expenses are directly related to the sale and delivery of merchandise.

What are the three forms of business organization discussed in the Statement of Changes in Equity lesson?

Single/Sole Proprietorship, Partnership, and Corporation.

How do decreases to equity differ between a sole proprietorship and a corporation?

Sole proprietorship equity decreases through owner withdrawals, whereas corporate equity decreases through the distribution of net income (dividends) to shareholders based on ownership.

What are the three main activity categories used to classify cash flows in a Cash Flow Statement (CFS)?

Operating Activities, Investing Activities, and Financing Activities.

What is the main difference between the Direct Method and the Indirect Method of presenting a Cash Flow Statement?

The Direct Method shows each major class of gross cash receipts and gross cash payments for operating activities, while the Indirect Method reconciles net income/loss with operating cash flows by adjusting for non-cash transactions.

What formulas are used to calculate Peso change and Percentage change in Horizontal Analysis?

$\text{Peso change} = \text{Balance of Current Year} - \text{Balance of Prior Year}$ and $\text{Percentage change} = \frac{\text{Balance of Current Year} - \text{Balance of Prior Year}}{\text{Balance of Prior Year}}$

What are the base amounts used for Vertical Analysis in the Statement of Financial Position and the Statement of Comprehensive Income?

The base amount for the Statement of Financial Position is Total Assets, and the base amount for the Statement of Comprehensive Income is Net Sales.

What are the four measurement levels defined in Financial Statement Analysis?

Liquidity, Solvency, Profitability, and Stability.

How do Solvency and Liquidity differ in financial analysis?

Solvency measures an entity's ability to survive over a long period of time and pay long-term liabilities, whereas Liquidity measures the ability to pay currently maturing obligations and meet short-term debt.