assets and liabilities

• assets

  OWN
• liabilities

  OWE
• current

  short term (less than a year)
• non-current/ fixed

  long term (more than a year)
• current assets

  - change with every transaction - can be turned into cash quickly
• current assets examples

  - cash

  - stock (inventory)

  - debtors ( trade receivables) - the money someone else owes you it is yours
• fixed assets


  - does not change in the short term - owner of the enterprise will use to make money

  - machinery, property, vehicle, land
• selling assets

  raising money from selling items that are no longer required
• Current Liabilities


  short term things you owe
• current liabilities examples

  - creditors (an entity, company or person that has provided goods, services or a monetary loan to a debtor.)

  - bank overdrafts - lets you borrow money through your current account by taking out more money than you have in the account

  
  

  the money you owe to someone else
• long term liability


  - long term thing you owe
• long term liability examples

  -bank loan, mortgage
• capital


  the money put in to start up
• share capital

  Share capital is the money invested in a company by the shareholders.
• capital linked to profit


  if an owner decides to use net profit to help the business grow, this is known as RETAINED PROFIT
• Net current assets formula

  Net current assets = current assets - current liabilities

  
  

  NCA = CA - CL
• net assets can also be called...

  total equity
• Net assets formula

  (fixed assets + current assets) - (total current liabilities + long term liability)
• Working capital ( aka net current assets)


  funds an enterprise has to pay for day-to-day expenses
• statement of financial position


  - shows overall value of the enterprise

  
  

  - a legal requirement for all limited companies to prepare a statement of financial position
• what does it show suppliers and creditors?

  (purpose of statement of financial position)

  - suppliers and creditors use it to determine the level of risk involved in lending or supplying to the business
• what can it be used to analyse?

  (purpose of statement of financial position)

  can be used to analyse ratios which can be compared with previous years or those of competitors. This will better aid future decision-making
• what can it be used to show the value of?

  (purpose of statement of financial position)

  to show the value of all current assets, non-current assets, liabilities and non-current liabilities
• who use financial info?

  - government (HMRC) to calculate tax payments

  
  

  - banks to make lending decisions

  
  

  - employees to make sure their jobs are secure