7115 · 5.4
Statement of financial position flashcards
Revision flashcards for Cambridge 7115 Statement of financial position (syllabus 5.4). Flip, recall, then mark a real past-paper question.
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Accounting equation?
Assets = Liabilities + Equity.
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Non-current asset examples?
Property, plant, equipment, intangible assets, long-term investments.
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Current asset examples?
Inventory, trade receivables, cash, prepayments.
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Current liability examples?
Trade payables, overdraft, short-term loans, accruals.
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Equity components?
Share capital + retained earnings (accumulated profits).
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Net assets?
Total assets − Total liabilities (= equity).
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Working capital?
Current assets − Current liabilities.
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Link to liquidity ratios?
10.2.1 uses current assets and current liabilities from this statement.
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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.