Page 280 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 5 Financial information and decisions

KEY TERM Assets
Assets are any resource which a business owns. They can be divided into non-

Non-current (fixed) assets:
resources that a business owns current assets and current assets.
and expects to use for more than
one year. Non-current (fixed) assets
Non-current (fi xed) assets are resources that the business owns and expects to
use for a period of more than one year. Examples are land, buildings, machinery,
computers and motor vehicles.

Trade receivable:
Current assets
see Chapter 19, page 250.
Current assets are cash or any other resource owned by the business which
Debentures: see Chapter 19, it expects to convert into cash within the next 12 months. The most common

page 253.
examples of current assets are inventories (stock), trade receivable (debtors) and
cash. Current assets are very important to business because they are an important
source of liquidity.

Liquidity: see Chapter 23, Liabilities
page 288.
Liabilities are the amounts owed by the business to stakeholders such as suppliers

and lenders. The liabilities of a business can be divided into:
KEY TERMS ■ Current liabilities are the short-term debts of a business which it expects to pay
within the next year. Examples include trade payable (these used to be called
Current assets: resources that

creditors), bank overdraft, taxation and dividends.
the business owns and expects to
278 convert into cash before the date ■ Non-current (long term) liabilities are the long-term debts of a business which
of the next balance sheet. it does not expect to repay within the next year. Examples include long-term bank
Trade receivable: the amount loans, mortgages and debentures.
of money owed to the business ■ Owner’s equity is the amount of money that has been invested in the business
by customers who have been sold by the owners. This includes money brought into the business by the owners
goods on credit.
plus any retained profit. For a limited company these amounts are also known as
Current liabilities: debts of shareholders’ equity or shareholders’ funds.
the business which it expects to
pay before the date of the next
balance sheet.
Trade payable: the amount a
business owes to its suppliers for
goods bought on credit.
Non-current liabilities: debts
of the business which will be
payable after more than

one year.
Owner’s equity: the amount
owed by the business to its
owners; includes capital and
retained profits.
Shareholders’ equity (funds):
alternative term for owner’s
equity, but can only be used by
limited liability companies.

Current assets include cash