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All 30 Flashcards — Balance sheets
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Question
What are non-current assets?
Answer
Items owned for more than one year that help generate income. Also called fixed assets.
💡 Hint
Owned for 1+ years
Question
What is a balance sheet?
Answer
A snapshot of what a business owns (assets), owes (liabilities) and the owner's equity at a specific point in time. Also called a statement of financial position.
💡 Hint
Snapshot of owns, owes, equity
Question
What are non-current liabilities?
Answer
Long-term debts not due within one year — bank loans, mortgages, debentures.
💡 Hint
Debts due after 1+ year
Question
State the accounting equation and what each part means
Answer
Assets (owns) = Liabilities (owes) + Equity (owners' stake). Must always balance.
💡 Hint
Owns = Owes + Owners'
Question
What happens if you don't use the IB prescribed balance sheet format?
Answer
Maximum 3 out of 4 marks — you MUST use the exact IB structure for full marks.
💡 Hint
Max 3/4 without correct format
Question
What are current assets?
Answer
Items converted to cash within one year — stock (inventory), trade receivables (debtors), cash.
💡 Hint
Cash within 1 year
Question
Give three examples of non-current assets
Answer
Land/buildings, machinery/equipment, vehicles, IT systems, intangible assets (goodwill, patents, trademarks).
💡 Hint
Long-term tools of business
Question
What is the time dividing line between current and non-current items?
Answer
One year — current = within 1 year, non-current = more than 1 year. Applies to assets and liabilities.
💡 Hint
1 year
Question
State the accounting equation
Answer
Assets = Liabilities + Owner's equity. This ALWAYS balances.
💡 Hint
A = L + ___
Question
What is the correct order of sections in the IB balance sheet?
Answer
Non-current assets → Current assets → Total assets → Current liabilities → Non-current liabilities → Total liabilities → Net assets → Equity
💡 Hint
NCA, CA, CL, NCL, Equity
Question
What are current liabilities?
Answer
Debts the business must pay within one year — trade payables (creditors), overdrafts, tax owed.
💡 Hint
Pay within 1 year
Question
What is owner's equity?
Answer
The value belonging to owners after all liabilities are paid. Includes share capital and retained profit.
💡 Hint
What's left for owners
Question
What is depreciation?
Answer
The reduction in value of tangible non-current assets over time due to wear and tear or obsolescence.
💡 Hint
Value drops over time
Question
How does the balance sheet differ from the income statement in terms of time?
Answer
Balance sheet = snapshot at ONE point in time (photo). Income statement = period of time (video).
💡 Hint
Photo vs video
Question
What is the formula for working capital?
Answer
Working capital = Current assets − Current liabilities
💡 Hint
CA minus CL
Question
What two components make up equity?
Answer
Share capital (money invested by shareholders) and retained profit (accumulated profits kept in the business).
💡 Hint
Invested + kept profits
Question
What must the heading of a balance sheet include?
Answer
Business name AND the specific date ('as at [date]') — not a period.
💡 Hint
Name + 'as at' date
Question
Why practise constructing balance sheets from scratch?
Answer
Speed and accuracy under exam conditions — know the structure by heart.
💡 Hint
Practise = speed + accuracy
Question
Why is it called a 'balance' sheet?
Answer
Because assets always equal liabilities + equity — everything owned was funded by borrowing or owners' money.
💡 Hint
A = L + E always
Question
What key check must you do after constructing a balance sheet?
Answer
Net assets must equal total equity. Also: Total assets = Total liabilities + Equity.
💡 Hint
Net assets = Equity
Question
What is net book value?
Answer
Original cost minus accumulated depreciation — how non-current assets appear on the balance sheet.
💡 Hint
Cost minus depreciation
Question
How do you calculate equity from the accounting equation?
Answer
Equity = Assets − Liabilities
💡 Hint
A minus L
Question
What does negative working capital mean?
Answer
The business cannot pay its short-term debts from current assets — a danger sign for liquidity.
💡 Hint
Can't pay short-term bills
Question
Balance sheet = snapshot (photo). Income statement = ?
Answer
A period of time (video) — showing performance over the year.
💡 Hint
Photo vs video
Question
What is another name for a balance sheet?
Answer
Statement of financial position — the IB uses both terms.
💡 Hint
Statement of financial ___
Question
How is net assets calculated?
Answer
Net assets = Total assets − Total liabilities. Must equal total equity.
💡 Hint
Total A minus Total L
Question
Quick recall: Working capital = ?
Answer
Current assets − Current liabilities
💡 Hint
CA minus CL
Question
If your balance sheet doesn't balance, what should you do?
Answer
Recheck all figures — Assets MUST equal Liabilities + Equity. An imbalance means there's an error.
💡 Hint
A = L + E always
Question
Depreciation is for tangible assets. What is the equivalent for intangible assets?
Answer
Amortisation — the gradual write-off of intangible assets like patents and goodwill.
💡 Hint
Amortisation
Question
Trade receivables vs trade payables — what's the difference?
Answer
Receivables (debtors) = money owed BY customers. Payables (creditors) = money owed TO suppliers.
💡 Hint
Owed to you vs you owe
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