Purpose of Financial Statements
This financial statement shows whether a business made a profit or loss during a period.
What is an Income Statement/ Profit or Loss Statement?
Sales minus Returns Inwards equals this.
What is Net Sales?
This section includes cash, inventory, and accounts receivable.
What are current assets?
Current Assets minus Current Liabilities.
What is working capital?
Net Profit causes Capital to do this.
What is increase?
Financial statements help business owners make these
What are business decisions?
Net Sales minus Cost of Goods Sold equals this.
What is Gross Profit?
This section includes accounts payable and bank overdraft.
What are current liabilities?
If Current Assets are $40,000 and Current Liabilities are $25,000, calculate this.
What is working capital equal to $ 15,000?
Net Loss causes Capital to do this.
What is decrease?
This group uses financial statements to decide whether to lend money to a business.
What are banks or creditors?
Rent, wages and insurance are examples of these.
What are operating expenses?
Assets used for more than one year.
What are non-current assets?
Positive working capital generally indicates this about liquidity.
What is good short-term financial health?
This item is deducted from Capital but is not a business expense.
What are Drawings?
Financial statements provide information about profitability, liquidity, and this third aspect.
What is financial position?
Gross Profit plus Other Income minus Expenses equals this.
What is Net profit or Net Loss?
This accounting equation forms the basis of the balance sheet.
What is Assets = Capital + Liabilities?
Working Capital is negative when Current Liabilities are this.
What is greater than Current Assets?
Beginning Capital + Net Profit − Drawings equals this.
What is Closing Capital?
The main purpose of financial statements is to communicate information about a business.
What is performance and financial position?
Goods available for sale less Closing Inventory equals this.
What is the cost of goods sold
A classified balance sheet separates assets and liabilities into these categories.
What is Current and Non-current?
Inventory, Cash, Debtors, and Prepaid Expenses belong in this Working Capital calculation category.
What are Current Assets?
Beginning Capital is $50,000; Net Profit is $12,000; Drawings are $4,000. This is Closing Capital.
What is $58,000?