Module 8- Income Statement and Depreciation
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12 Terms
What is the reporting period format for a statement of financial performance?
For the XX period ended XX Month 20XX
What is the reporting period format for a statement of financial position?
As at XX Month 20XX
What is the Accrual basis?
Records financial transactions such as revenue and expenses when they occur, not necessarily when cash is exchanged, emphasising economic events over cash flow.
What is pre-paid revenue?
Business receives payment for goods or services not yet delivered or performed, thus the payment is considered a liability.
(You still owe them the product/service)
What is a pre-paid expense?
Payments made in advance for goods or services to be received in the future, thus an asset.
(You currently hold the right to the product which has value e.g. plane tickets purchased for staff to travel in future)
Three main sections in a Cash Flow Statement
Operating Activities
Investing Activities
Financing Activities
What do Operating Activities consist of in CF/S?
Activities related to the provision of goods and services
Cash transactions incurred within the period from operational activities
Provides insight into ability to meet liabilities, expand using cashflow,
What do Investing Activities consist of in CF/S?
Activities relating to the acquisition and/or disposal of
- Non current assets and investments (e.g., securitises), not falling within the definition of cash.
Allows users to analyse future entity direction by assessing impact of major asset acquisitions and disposals.
What do Financing Activities consist of in CF/S?
Activities usually associated with changes in non-current liabilities and equity.
Activities that change the size and/or composition of the financial structure of the entity.
What is Accumulated Depreciation?
Represents the loss in value of fixed assets over time. It shows the expenses related to generating revenue in the same period that the revenue is recognised, providing a clear picture of profitability.