IBBusinessDPBusiness ManagementSLFlashcards3. Finance & Accounts3.4 Final Accounts

3.4 Final Accounts (DP IB Business Management)

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  • What is the purpose of financial accounts?

    Financial accounts detail the financial performance of a business over a trading period.

  • What does the statement of profit or loss show?

    The statement of profit or loss shows the income and expenditure of a business over a period of time, usually a year, and the amount of profit made.

  • What are the three sections of the statement of profit or loss?

    The three sections of the statement of profit or loss are:

    • The trading account

    • The profit and loss account

    • The appropriation account.

  • What is calculated in the trading account?

    In the trading account, the cost of sales is deducted from sales revenue to calculate the gross profit.

  • Define the term gross profit.

    Gross profit is the difference between sales revenue and cost of sales.

  • What is deducted from gross profit in the profit and loss account section?

    In the profit and loss account section, expenses are deducted to determine profit for the period.

  • What does the appropriations account show?

    The appropriations account shows how profits are distributed for the period.

  • True or False?

    Non-profit organisations replace the word 'profit' with 'surplus' in their financial statements.

    True.

    Non-profit organisations replace the word 'profit' with 'surplus' in their financial statements.

  • What stakeholder group is particularly interested in dividend payments?

    Shareholders are particularly interested in dividend payments, as well as revenues, costs and profits earned and business growth.

  • How is profit before interest and tax calculated?

    Formula.

    Profit space before space interest space and space tax space equals space Gross space profit space minus space Expenses

  • True or False?

    Non-profit organisations must pay corporation tax.

    False.

    Non-profit organisations are usually exempted from the payment of corporation tax.

  • In which section of a company's financial accounts could employees find details of executive pay?

    Employees could find details of executive pay in the notes to the accounts.

  • What does the statement of financial position show?

    The statement of financial position shows the financial structure of a business at a specific point in time, recording the business assets and liabilities and specifying the capital used to fund the business.

  • Give another common name for the statement of financial position.

    Another name for the statement of financial position is the balance sheet.

  • True or False?

    The statement of financial position is sometimes called the balance sheet because assets always equal liabilities.

    False.

    The statement of financial position is sometimes called the balance sheet because net assets equal total equity.

  • What is the formula used to calculate net assets?

    Formula.

    Net space assets space equals space Total space assets space minus space Total space liabilities

  • Define the term current assets.

    Current assets are assets that can be easily converted into cash within one year, such as cash, debtors, and stock.

  • True or False?

    Current liabilities are debts that must be paid within one year.

    True.

    Current liabilities are debts that must be paid within one year.

  • What are non-current assets?

    Non-current assets are long-term assets that are not easily convertible to cash, such as property, plant, and machinery.

  • True or False?

    Shareholders use the statement of financial position to identify the level of profit generated during the financial year.

    False.

    Shareholders use the Statement of Financial Position to identify the asset structure of the business, calculate working capital, and determine the rough value of the business.

  • What are liquid assets?

    Liquid assets are those current assets that are available to meet immediate financial obligations, such as cash.

  • True or False?

    Creditors use the statement of financial position to judge the solvency of the business and determine the level of risk when offering firms trade credit.

    True.

    Creditors use the statement of financial position to judge the solvency of the business and determine the level of risk when offering firms trade credit.

  • What are intangible assets?

    Intangible assets are non-physical items owned by a business, such as patents or goodwill, that cannot be held or touched.

  • What is meant by the term brand value?

    Brand value is the reputation, recognition and features such as brand name, logos and slogans associated with a brand that can be quantified and recorded in the statement of financial position.

  • True or False?

    Intangible assets are not included in the annual report as they cannot be valued.

    False.

    Intangible assets are included in the annual report as they can be quantified and may be a key element of a business's value.

  • What is goodwill?

    The quantifiable value of a company's reputation, customer base and brand, which often represents the premium paid when one business takes over or merges with another business.

  • True or False?

    Managers use the statement of financial position to identify the working capital position of the business.

    True.

    Managers use the statement of financial position to identify the working capital position of the business. This helps determine if there are enough liquid current assets to pay bills.

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2. Human Resource Management
3. Finance & Accounts
4. Marketing
5. Operations Management
6. The Business Management Toolkit