3.4 Final Accounts

• Order of profit and loss statement: company name, statement of profit or loss for the year ended (date), gross profit, profit before interest and tax, profit before tax, profit for period, retained profit
• Cost of sales=opening stock+purchases - closing stock
• Order of balance sheet: company name, statement of financial position as at date, Non-current assets, current assets, total assets, current liabilities, non current liabilities, total liabilities, net assets, equity, total equity
• Lifespan is the useful life of a fixed asset.
• The residual value is the scrap value at trade in
• Accumulated depreciation is the annual depreciation expense multiplied by numbers of years in use.
• The net book value is the historical cost/original purchase cost of an asset - accumulated depreciation.
• Annual appreciation=Purchase cost - residual value / lifespan
• Net book value=NBV of previous year - depreciation expense
• Depreciation per unit=purchase cost - residual value / expected units over lifetime
• Annual depreciation=depreciation per unit x number of units purchased
• Costs of sales on a profit/loss statement can be easily connected to the good/service that has been produced. They are also known as direct costs.
• Expenses on a profit/loss statement are costs that cannot be specifically connected to a good/service. They are also known as indirect costs.
• Assets - liabilities=equity
• Assets are items of monetary value owned by a business.
• Non current assets are assets able to be used by a business for more than 12 months.
• Current assets are assets likely to be converted into cash within 12 months or less such as cash, debtors or stock.
• Liabilities are legal obligations of a business repay its lenders or suppliers at a later date.
• Current liabilities are debts that must be settled in one year.
• Overdrafts are current liabilities.
• Trade creditors are current liabilities.
• Short term loans are current liabilities.
• Non current liabilites are debts due to be paid after 12 months.
• Bank loans are non current liabilities.
• Mortgages are non current liabilities.
• Debentures are non current liabilities.
• Long term borrowings are non current liabilities.
• Equity is the value of the business belonging to the owners.
• Share capital is equity.
• Retained earnings is equity.
• A profit loss statement must be prepared before a balance sheet.
• Intangible assets are non-physical assets that can earn revenue for a business.
• A brand is a non tangible asset.
• A patent is a non tangible asset.
• A copyright is a non tangible asset.
• Goodwill is a non tangible asset.
• Registered trademarks are non tangible assets.
• Depreciation is when assets lose value over time usually due to wear and tear or obsolescence.
• Straight line depreciation is calculated by purchase cost - residual value / lifespan.
• Units of production is calculated by finding depreciation per unit which is purchase cost - residual value /expected number of units over lifetime.