Upgrade to remove ads
Only $2.99/month

Financial statements

Terms in this set (27)

3 financial statements
income statement, statement of financial position, cash budget
income statement purpose
calculates the gross profit and the profit for the year of the company
statement of financial position purpose
shows the items a business owns (assets), what they owe (liabilities) and the overall value of the business
cash budget purpose
helps business remain liquid by identifying cash flow problems and plan investment
terms used in income statement
sales revenue, gross profit, profit for the year, expenses and cost of sales
terms used in statement of financial position
current assets, non current assets, current liabilities, non current liabilities, working equity, equity, net assets and net assets employed
terms used in cash budget
opening balance, total receipts, cash available, total payments, closing balance
sales revenue
money made from selling goods
cost of sales
money spent on selling goods. (opening inventory + purchases) - closing inventory
gross profit
profit made from buying and selling. sales revenue - cost of sales
expenses
running costs through the year
profit for the year
gross profit - expenses
non-current assets
items owned for longer than a year
current assets
items owned for less than a year
non-current liabilities
items owed for more than a year
current liabilities
items owed for less than a year
working equity
ability to pay short term debts. current assets - current liabilities.
equity
shows how the business has been financed. should add up to total net assets
net assets
overall value of the business. net assets employed - non current liabilities
net assets employed
value of non current assets added to working equity
opening balance
amount of cash available at the start of the month
total receipts
cash received during the month
cash available
cash available to spend. opening balance + total receipts
total payments
cash spent during the month
closing balance
cash available at end of the month. cash available - total payments
6 benefits of preparing a cash budget
shows future surpluses/defecits, can compare predicted and actual figures, plans investment, highlights periods of high expense so spending can be controlled, aids decision making, sets targets to stay within budget
9 impacts of poor cash flow on a business
can't pay suppliers, can't pay expenses, have to sell assets, have to find cheaper supplier, reduce price of goods to aid sales, restricts growth, low employee morale, can't invest, may result in redundancies.
THIS SET IS OFTEN IN FOLDERS WITH...