3.4 - Finance and Accounting Review

These flashcards cover key concepts related to financial statements, accounting purposes, assets, liabilities, equity, and methods of depreciation.

What are final accounts?

Final accounts comprise the profit and loss statement and the balance sheet, essential for financial record-keeping.

What is the purpose of accounts for stakeholders?

Accounts ensure transparency in the use of company funds and help stakeholders understand the financial performance of a business.

What does a profit and loss statement show?

The profit and loss statement shows the net profit or loss of a business over a trading period.

What is the difference between cost of sales and expenses?

Cost of sales refers to direct costs associated with the production of goods sold, while expenses cover other operational costs.

What are the two types of assets on the balance sheet?

The two types of assets are current assets and non-current assets.

What is equity as shown in the balance sheet?

Equity represents the value of the business belonging to the owners, which includes share capital and retained earnings.

How is surplus defined in non-profit entities?

Surplus is what a non-profit entity earns after all expenses have been paid from the firm's gross surplus.

What are intangible assets?

Intangible assets are non-physical non-current assets that can earn revenue for a business and include elements like patents and copyrights.

What is the straight-line method of depreciation?

The straight-line method of depreciation spreads the purchase cost of an asset evenly over its useful lifespan.

What factors can improve gross profit for profit-making entities?

Increasing sales revenue through higher prices or greater quantities sold, and reducing cost of sales.