16.3 Final accounts of limited companies

• What are the final accounts of a limited company prepared at the end of?

  Financial year
• Match the financial statement with its purpose:

  Income Statement ↔️ Shows revenue, expenses, and profit/loss

  Statement of Financial Position ↔️ Shows assets, liabilities, and equity

  Statement of Changes in Equity ↔️ Shows changes in equity accounts

  Statement of Cash Flows ↔️ Shows cash inflows and outflows
• The Income Statement reports the company's financial performance over a specific period
• The four key financial statements in final accounts are the Income Statement, the Statement of Financial Position, the Statement of Changes in Equity, and the Statement of Cash Flows
• Order the sections of the Income Statement:

  1️⃣ Revenue

  2️⃣ Cost of Goods Sold (COGS)

  3️⃣ Gross Profit

  4️⃣ Operating Expenses

  5️⃣ Operating Profit

  6️⃣ Net Profit
• The accounting equation is Assets = Liabilities + Equity.


  True
• Operating profit is calculated as Gross Profit minus Operating Expenses
• The final accounts of a limited company provide a comprehensive view of its financial performance and position
• What does the Income Statement show?

  Revenues, expenses, profit/loss
• Current assets, such as cash and accounts receivable, are categorized under assets
• The income statement summarizes financial performance over a specific period.


  True
• Order the calculations in the income statement:

  1️⃣ Revenue - Cost of Goods Sold = Gross Profit

  2️⃣ Gross Profit - Operating Expenses = Operating Profit

  3️⃣ Operating Profit - Interest and Taxes = Net Profit
• What are the three equity accounts tracked in the Statement of Changes in Equity?

  Share capital, retained earnings, reserves
• What type of cash flow results from buying or selling long-term assets?

  Investing activities
• Order the three main sections of the Statement of Cash Flows:

  1️⃣ Operating Activities

  2️⃣ Investing Activities

  3️⃣ Financing Activities
• Revenue in an income statement represents the total income from sales
• Match the financial term with its definition:

  Assets ↔️ Resources owned by the company

  Liabilities ↔️ Obligations owed by the company
• Gross profit is the same as operating profit.

  False
• Equity in a statement of financial position includes share capital and retained earnings
• Cash from investing activities comes from the purchase or sale of long-term assets
• What is the main purpose of final accounts for a limited company?

  Show financial performance and position
• What is the purpose of the income statement in final accounts?

  Shows revenues, expenses, profit/loss
• The statement of changes in equity summarizes cash inflows and outflows.

  False
• Steps in calculating net profit

  1️⃣ Calculate Gross Profit (Revenue - COGS)

  2️⃣ Subtract Operating Expenses from Gross Profit

  3️⃣ Subtract Interest and Taxes from Operating Profit

  4️⃣ Result is Net Profit
• The Cost of Goods Sold (COGS) includes indirect costs of production.

  False
• Arrange the sections of the income statement in the correct order.

  1️⃣ Revenue

  2️⃣ Gross Profit

  3️⃣ Operating Profit

  4️⃣ Net Profit
• The income statement starts with revenue
• What does the statement of changes in equity track variations in?

  Equity accounts
• Retained earnings are reduced when dividends are paid.


  True
• The statement of cash flows summarizes cash inflows and outflows from all business activities.


  True
• The main purpose of final accounts is to show the company's financial performance and financial position
• Order the preparation of the four key financial statements in final accounts:

  1️⃣ Income Statement

  2️⃣ Statement of Financial Position

  3️⃣ Statement of Changes in Equity

  4️⃣ Statement of Cash Flows
• Match the financial statement with its primary purpose:

  Income Statement ↔️ Reports financial performance

  Statement of Financial Position ↔️ Presents assets, liabilities, and equity

  Statement of Changes in Equity ↔️ Summarizes changes in equity

  Statement of Cash Flows ↔️ Summarizes cash movements
• Final accounts are prepared to show the company's financial performance and financial position.

  True
• What does the Income Statement show for a limited company?

  Revenue, expenses, profit/loss
• The Statement of Financial Position displays the company's assets, liabilities, and equity at the end of the year
• What does the Statement of Cash Flows outline?

  Cash inflows and outflows
• The final accounts of a limited company include four key financial statements.


  True
• The Statement of Financial Position presents a company's assets, liabilities, and equity at a specific point in time
• Match the financial statement with its purpose:

  Income Statement ↔️ Shows revenues, expenses, profit/loss

  Statement of Financial Position ↔️ Presents assets, liabilities, equity

  Statement of Changes in Equity ↔️ Shows changes in equity accounts

  Statement of Cash Flows ↔️ Summarizes cash inflows and outflows