Accounting Basic
What is a statement of financial position?
A statement showing a business’s assets, liabilities, and capital at a specific date.
What are non-current assets?
Assets held for long-term business use.
What is the purpose of a Statement of Financial Position?
To show a business’s financial position on a specific date.
What is an income statement?
A statement showing a business’s profit or loss.
What is the basic accounting equation?
Assets= Capital = Liability
What are the three main elements of this statement?
Assets, liabilities, and capital.
What are current assets?
Assets expected to be used or converted into cash within one year.
What is accounts receivable?
Money owed to a business by customers.
What is revenue?
Income earned from selling goods or services.
If a business has assets of $100,000 and liabilities of $30,000, what is the owner's capital?
Capital= Assets- Liabilities
Capital = $ 70,000
What are assets?
Resources owned by a business that have value.
What is capital?
The owner's investment or interest in the business.
What is accounts payable?
Money a business owes its suppliers.
What is the cost of sales?
Cost of Goods Available for Sale − Closing Stock
A business owner invests $50,000 cash into the business. What happens to the accounting equation?
Assets increase by $50,000, and capital increases by $50,000
What are liabilities?
Amounts a business owes to others.
What are drawings?
Money or goods taken from the business by the owner for personal use.
How is working capital calculated?
Current assets minus current liabilities.
What is gross profit?
Revenue minus cost of sales.
A business buys equipment for $20,000 on credit. What happens to the accounting equation?
Assets increase by $20,000 and liabilities by $20,000.
What is the accounting equation?
Assets = Liabilities + Capital
A business purchases furniture for $50,000 is the furniture an asset, liability or capital? And why?
Assets, because the furniture is something of value owned by the business.
From the role-play, how much money did Giovannie invest in his business?
$3,000,000
What is net profit?
Gross profit minus expenses.
A business has assets of $250,000 and capital of $175,000. Calculate its liabilities.
Assets= Capital + Liabilities
$250,000= $175,000 + Liabilities
Liabilities= Assets - Capital
Liabilities = $250,000 - $175,000
Liabilities= $75,000