9609 · 10.1.2
Statement of financial position flashcards
Revision flashcards for Cambridge 9609 Statement of financial position (syllabus 10.1.2). Flip, recall, then mark a real past-paper question.
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What is the fundamental accounting equation?
Assets = Liabilities + Equity. It states that a company's assets are financed by either debt (liabilities) or the owners' investment (equity).
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Define 'Non-Current Asset'.
An asset owned by a business for more than one year, used to generate revenue, and not intended for resale in the short term. Examples include property, machinery, and vehicles.
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What is the difference between 'Trade Receivables' and 'Trade Payables'?
Trade Receivables are a current asset, representing money owed TO the business by its customers. Trade Payables are a current liability, representing money the business owes TO its suppliers.
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What does 'Equity' or 'Shareholders' Funds' represent?
It represents the owners' stake in the company. It is the residual value of assets after deducting all liabilities and is composed of Share Capital and Retained Earnings.
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Define 'Working Capital'.
Working Capital = Current Assets - Current Liabilities. It is a measure of a company's short-term liquidity and its ability to meet its immediate financial obligations.
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What are the main components of equity?
Share capital (funds from issuing shares) and Retained earnings (accumulated profits not paid out as dividends).
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Give two examples of non-current liabilities.
Long-term bank loans and debentures.
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What is another name for the Statement of Financial Position?
The Balance Sheet.
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How are assets on the Statement of Financial Position ordered?
They are typically listed in order of reverse liquidity, with non-current assets first, followed by current assets.
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What does 'Net Assets' represent?
Net Assets = Total Assets - Total Liabilities. It is mathematically equal to Equity.
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What is the purpose of the Statement of Financial Position?
To provide a snapshot of a company's financial health at a specific point in time by listing its assets, liabilities, and equity.
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Can a profitable company go bankrupt?
Yes. Profitability (from the Statement of Profit or Loss) is different from liquidity. A company can be profitable but lack the cash (as shown on the SoFP) to pay its short-term debts, leading to insolvency.
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What are intangible assets?
Non-physical assets with value, such as patents, copyrights, trademarks, and goodwill. They are a type of non-current asset.