Financial Statements Flashcards

claire.harrison
Flashcards by claire.harrison, updated more than 1 year ago
claire.harrison
Created by claire.harrison over 5 years ago
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Description

Level 3 AAT AAT Level 3 (Sole Traders and Partnerships ) Flashcards on Financial Statements Flashcards, created by claire.harrison on 02/24/2015.

Resource summary

Question Answer
Relevance Financial Information is said to be relevant if : - It has the ability to influence the economic decisions of the users - It is provided in time to influence those decisions
Reliability Valuations (such as depreciation or inventory) must be; - Free from bias - Free from material errors - With a degree of caution (prudence)
Comparability Information is much more useful if it is comparable over time and also with similar information about other businesses.
Ease of Understanding Users should be able to understand with a reasonable knowledge of accounting and have a willingness to study the information diligently.
Materiality Materiality defines the threshold or cut-off point after which financial information becomes relevant to the decision making needs of the users.
Statement of Profit or Loss (SPL) Summary of Activity in the year Income Expenses
Statement of Financial Position (SPF) Snapshot of the business on final day of accounting period Assets Liabilities Capital
SPL - Example
SFP - Example
SFP Non-Current Assets Premises Shop Fittings Vehicles
SFP Current Assets Closing Inventory Trade Receivables (minus Allowance DD) Pre-Payment of Expenses Bank
SFP Current Liabilities Trade Payables Accrual of Expenses VAT Owed
SFP Non-Current Liabilities Loan from Bank Mortgage
SFP Financed By Capital + Profit - Drawings (Should match Net Assets)
SFP Net Assets Non-Current Assets + Net Current Assets - Non-Currnet Liabilities = NET ASSETS
SPL Gross Profit Sales Revenue - Sales Returns =SALES +Opening Inventory +Purchases -Purchases Returns -Closing Inventory =COST OF SALES SALES - COST OF SALES = GROSS PROFIT
SPL Additional Income Discount Received Rent Received Profit on Disposal Allowance for DD Adjustment (CR)
SPL Expenses General Expenses Interest Paid Wages Discount Allowed Irrecoverable Debts Depreciation Allowance DD Adjustment (DR) Loss on Disposal
SPL Overview Gross Profit + Additional Income – Expenses = Net Profit / Loss
Accruals SFP Current Liability
Allowance For Doubt Debts SFP (Removed from SLCA - Trade Receivables)
Accumulated Depreciation SFP Removed from Assets in the Accumulated Depreciation Column
Pre-Payments SFP Current Asset
Allowance for Doubtful Debts Adjustments SPL Expenses
Opening Inventory SPL
SLCA Sales Ledger Control Account SFP Trade Receivables - Remove Allowance for Doubtful Debts before posting to the SFP
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