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Company Accounts (2)
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Key company accounts definitions and the purpose of an income statement and statement of financial position.
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Company AccountsKey Definitions:
Income Statement: Summaries income/expenses and details the
profits/losses made by the business in the accounting period.
Statement of Financial Position: Details in summary the financial position
of the business and how you pay for it.
Sales Revenue: Is the income earned in the accounting period from trading
activities.
Expenses: Are costs of running the business during the accounting period.
Profit or loss: Is the total income in the period less the total expenses
incurred.
Costs of goods sold: Term used to describe how much it costs actually to
make the goods -> raw materials/labour.
Asset: An item of value held by the business which can generate future
income.
o Tangible asset: Property/premises/plant/machinery and equipment:
which can be physically viewed.
o Intangible Asset: Intellectual rights/property: items of value but not
physical in nature.
Non-current assets: Assets that the business expects to retain ownership
of for a period of at least one year and is of use to the business.
Current Assets: What the business expects to turn to cash within a one-
year period.
Inventories/Stock: Goods that have been purchased for resale but remain
unsold at the end of the year.
Trade Receivables: Money that is owed from customers to the business.
Liabilities: Debt the business has to pay.
Non-current liabilities: Debts/obligations the business is required to meet
in a future accounting period. Is long term e.g. mortgage/bank loan/lease
agreement.
Current Liabilities: Short term - expenses that the business has to pay
within a one-year accounting period.
Trade Payables: Money that is owed from a business to a supplier who
provided goods/services on credit.
Equity: Terms used to describe the value of funds and can be attributed to
the owner.
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