2.1.9. Financial Statement Terms
The technical accounting term for the fact
that financial statements are prepared under
an assumption of an operational business.
For e xa mp le, inco me that is due for receipt
in a future period is included in the balance
Payments that are due but have not yet been
made. This is recorded as a liability.
Payments that are due fro m c lients or
customers but have not yet been received.
This is recorded as an asset.
An expense that records a decline in the
value of an intangible asset, such as a patent
with a limited period of operation.
An item that has monetary value. This
includes tangible ite ms such a land,
buildings and equipment. So me intangible
ite ms are also recorded as assets, such as the
value of a licence or patent. Debts owed to
the business are also listed as assets.
Bad and doubtful debts
A debt that has passed the due date without
payment having been received. Various
credit recovery steps may be taken, with
some debts never being recovered, and
written off as an e xpense.
Ba lance sheet
A statement of the assets, liabilit ies, and net
assets of the business at a point in time.
Capita l e xpenditure
Funds spent on large, long-term ite ms such
as equipment, build ings, and development
of new fac ilit ies, as opposed to operating
e xpenses which are part of the regular
operation of the business.
Cash flow statement
A statement of cash payments received and
made by the business. The may be grouped
into operating cash flow (general inco me
and expenses), investment cash flow (sale
and purchase of ma jor assets), and funding
cash flow (debt and equity raised or repaid).
Accounts prepared as a combination of the
assets and liabilit ies of several re lated
business, combined into a single balance