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L6 Business Management > 3.4 Final Accounts > Flashcards

3.4 Final Accounts Flashcards

1
Q

stakeholders

A

any individual or group that affects, or is affected by, an organisation

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2
Q

internal stakeholders list

A

management, owners and shareholders, and employees

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3
Q

internal stakeholders

A

groups within the business that are interested in the final accounts

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4
Q

management

A

people in the organisation that plan, organise, coordinate, and control the activities in the business

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5
Q

how does management use final accounts

A
  • see how easily a business can cover its immediate, short-term and medium-term debts to ensure that the company does not become insolvent
  • see profit earned during the year
  • see value of assets owned by the company
  • see amount of money invested by shareholders
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6
Q

owners and shareholders

A

individuals and organisations that own shares in the company

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7
Q

how owners and shareholders use final accounts

A
  • see how effectively their money has been effected
  • see how much they will receive in dividends
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8
Q

employees

A

people who work in the business

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9
Q

how employees use final accounts

A
  • see overall financial stability of the business and how secure their jobs are
  • be able to negotiate for better wages based on the profits of the business
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10
Q

external stakeholders

A

groups outside the business that are interested in the final accounts of that business

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11
Q

external stakeholders list

A

government, competitors, banks, the business’s suppliers and the local community

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12
Q

government

A

government authorities of the country, region, or city where the business is located

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13
Q

why governments are interested in final accounts

A
  • assess taxes on the business based on the business’s profits
  • assess health of the business as they provide jobs and contribute to the community/ economy
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14
Q

competitors

A

rival businesses in the market

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15
Q

why do competitors want to see final accounts

A
  • assess overall financial strength of the company
  • compare profits for the year of businesses in the same industry as themselves
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16
Q

why do banks want to see final accounts

A

check ability of a business to repay loans

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17
Q

suppliers

A

businesses that supply goods and services to the company

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18
Q

why do suppliers want to see final accounts

A

assess how effectively the company would be able to pay for the goods supplied to it on credit

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19
Q

local community

A

people and authorities of the town or city where the business is located

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20
Q

why does the local community want to see final accounts

A

interested in the wellbeing of the community

want to know whether the business is financially stable and will remain in the community to provide jobs and the goods and services that the community needs

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21
Q

statement of profit or less // income statement

A

profit or loss generated by a business from its trading activities

statement that records sales revenues and costs of a business to determine the net profit and distribution of profit

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22
Q

order for profit and loss statement for FOR-PROFITS

A

sales revenue
cost of sales
gross profit

salaries
lighting
rent
expenses
etc

profit before interest and tax
interest
profit before tax
tax
profit for the period

dividends
retained profit

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23
Q

gross profit formula

A

sales revenue - cost of sales

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24
Q

cost of sales

A

cost of goods sold by a business over a period of time

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25
profit before interest and tax formula
gross profit - expenses
26
dividends
money paid to shareholders from profit after interest and tax
27
retained profit
portion of the profit the business keeps for its use after dividends
28
order for statement of profit or loss for a non-profit
sales revenue cost of sales gross profit expenses surplus before interest and tax interest surplus before tax tax surplus for period retained surplus
29
non-profit social enterprise
works to improve social or environmental outcomes need to reinvest any and all surplus by law
30
features of a profit or loss statement for non-profit social enterprises
pay no taxes to the government pay no dividends to shareholders record their profits as surpluses
31
statement of financial position (aka balance sheet)
business's assets, liabilities and equity
32
assets
items an entity owns which have value
33
equity
value of shares issued by a company
34
assets formula
liabilities + equity
35
balance sheet for a for-profit order
non current assets (list them) non-current assets total current assets (list them) current assets total total assets current liabilities (list them) total current liabilities non-current liabilities (list them) total non-current liabilities total liabilities net assets equity share capital retained earnings total equity
36
non-current assets examples
buildings, machinery, vehicles, accumulated depreciation
37
current assets examples
cash debtors stock
38
current liabilities examples
overdrafts trade creditors short-term loans
39
non-current liabilities examples
mortgage long-term loans
40
debtors: asset or liability (and which type)
current asset
41
creditors: asset or liability (and which type)
current liabilities
42
overdraft: asset or liability (and which type)
current liabilities
43
cash
cash in hand and cash in bank account current asset
44
debtors
money owed to a business by individuals or organisations current asset
45
stock (inventory)
unsold goods, raw materials, and work-in-progress current asset
46
liquidity
ease with which assets can be converted to cash
47
liquidity of current assets from most liquid to least liquid
cash debtors stock
48
current assets
converted into cash in less than one year
49
non-current assets
likely to be kept by business for over one year
50
current liabilities
debts and payables due in one year
51
non-current assets
funds owed by company paid back in over 12 months
52
banks overdrafts
business takes out more money from bank account than it had to deposit current liability
53
short-term loans
money the business borrowed from a bank paid back in a shorter time current liability
54
trade creditors
money a business owes another business when it bought goods or services on credit
55
mortgage
loan for immovable property (aka land or building) where the property is taken as collateral
56
net assets
total assets - total liabilities
57
retained earrnings
money a company has left at the end of the trading year after all costs, expenses, dividends and taxes
58
share capital
finance for a business that is raised through the issue of shares to new investors on a stock market
59
balance sheet for non-profit social enterprises order
non-current assets (list) total non-current assets current assets (list) total current assets total assets current liabilities (list) total current liabilities current liabilities (list) total current liabilities total liabilities net assets equity retained earnings total equity
60
intangible assets
non-physical items of value owned by a company that have a lifespan of over an year
61
patents
licence/ grant that gives an inventor the exclusive right to make, use or sell a product for a specific period of time
62
copyright
legal protection that gives an author or creator the exclusive right to reproduce work for a specific period of time
63
goodwill
intangible value of a company derived from its 'good nature' in business attributed to brand loyalty, patents, talent management, good relationships with customers gives a business competitive edge over its rivals monetary value = higher selling price
63
registered trademark
form of intellectual property that refers to a word, symbol or phrase that identifies a specific product and distinguishes it
64
depreciation
loss of value of a fixed asset over time
65
causes of depreciation of non-current (fixed) assets
wear and tear obsolescence
66
wear and tear
working parts of factories and equipment damage and are deteriorated over time
67
obsolescence
when technology used in the asset has been surpassed by more recent innovations the asset becomes obsolete
68
straight-line method of depreciation
value decreases evenly over its useful life
69
straight-line depreciation formula for annual depreciation
(purchase price - residual value)/ estimated useful life
70
units of production method of depreciation
calculates loss in value of an asset by estimating the units produced annually
71
units of production method formula for annual depreciation
(yearly units of production/ total estimated lifetime production) * (original value of asset - residual value)
72
advantages of straight-line method
easy to calculate and apply complete value of the asset is accounted for in the scrap value
73
disadvantages of straight-line method
assumes the value is used evenly throughout its life, which is not the case for most assets useful life of some assets cannot be predicted and the scrap value is an estimate, so the depreciation method is not completely accurate
74
units of production method advantages
more realistic for many types of assets; provides a more accurate picture of the loss of value due to wear and tear
75
units of production method disadvantages
more complex to calculate
76
which assets is straight-line method better
assets that operate in a consistent way throughout the life of the asset and have a predictable life span less expensive items assets that don't become obsolete over their life span
77
which assets is units of production method better
assets with varied levels of use over time more expensive assets

L6 Business Management (21 decks)

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