Accounting and Budgeting

Question 1

What are assets?

Answer 1

What the business owns

Question 2

What are liabilities?

Answer 2

What the business owes

Question 3

What is capital?

Answer 3

All the money, goods and property a business can use to make an income

Question 4

What are the five main types of capital?

Answer 4

Fixed or physical capital
Financial capital
Share capital
Working or operating capital
Start-up capital

Question 5

What is fixed capital?

Answer 5

Goods used to produce other goods or services. Machines, tools, factory buildings, trucks

Question 6

What is financial capital?

Answer 6

The source of funds for a business. E.g. a loan

Question 7

What is share capital?

Answer 7

The money invested by the owners of a business. Usually used to buy fixed capital

Question 8

What is working capital?

Answer 8

The money needed to run a business from day to day.

Question 9

What is start-up capital?

Answer 9

The money needed to start a new business

Question 10

What are the two types of assets?

Answer 10

Non-current assets and current assets

Question 11

What are current assets?

Answer 11

Assets that can be converted into cash within the next year. E.g. inventories, debtors, cash in the bank

Question 12

What are non-current assets?

Answer 12

Assets that can not be converted into cash within the next year. E.g. land and buildings, vehicles, equipment, investments

Question 13

Give examples of liabilities.

Answer 13

Bank loans and share equity

Question 14

What are the two types of liabilities?

Answer 14

Non-current liabilities and current liabilities

Question 15

What are current liabilities?

Answer 15

Debts that have to be paid within the next year. E.g. creditors, overdraft

Question 16

What are non-current liabilities?

Answer 16

Long-term loans, such as mortgages and bonds

Question 17

What is a profit?

Answer 17

When a business has more income than expenses

Question 18

How is a business operating if its expenses are greater than its income?

Answer 18

It is operating at a loss

Question 19

What is an expense?

Answer 19

A payment for services or consumable goods that the business buys to keep running.

Question 20

Is an expense an asset?

Answer 20

No

Question 21

What are fixed expenses?

Answer 21

They are costs you have to pay each month no matter how much you produce or sell.
They are a noose around your neck!

Question 22

What is another name for fixed expenses?

Answer 22

Overheads (or a noose around your neck)

Question 23

Give examples of fixed expenses.

Answer 23

Rent
Telephone accounts
Water and electricity
Monthly wages
A noose around your neck

Question 24

What are variable expenses?

Answer 24

Expenses related to the goods and services produced by a business

Question 25

What happens to variable expenses if sales increase?

Answer 25

Variable expenses increase

Question 26

Is packaging a fixed expense?

Answer 26

No, it is variable. It increases as sales increase

Question 27

What is the aim of a business?

Answer 27

To make a profit

Question 28

What is a loss?

Answer 28

A decrease in financial value caused by expenses being greater than income in a certain period

Question 29

What does it mean to break even?

Answer 29

To make no profit or loss

Question 30

What is a budget?

Answer 30

A budget is a written plan on how spend income

Question 31

What does a budget show?

Answer 31

Estimated income and expenses for a business or person for a specific period or time

Question 32

What is the advantage to a family of having a budget?

Answer 32

You can ensure that you don't spend more than you earn

Question 33

Which expenses in a budget should ideally be paid first?

Answer 33

Essential expenses such as rent, electricity, school fees, food

Question 34

What do governments budget for?

Answer 34

Tax income and expenditure

Question 35

Once you've made a budget, do you leave it alone?

Answer 35

No, you check and update it regularly

Question 36

When is budget information used in a business?

Answer 36

Throughout the management process.

Question 37

What is saving?

Answer 37

Putting money aside for future use

Question 38

When can you save?

Answer 38

If you don't spend all your income

Question 39

What forms can saving take?

Answer 39

Bank account Spending less on electricity etc

Question 40

Why do people save?

Answer 40

To pay for future expenses such as education and retirement | To pay for emergencies such as accidents and unemployment

Question 41

List some ideas for how to save.

Answer 41

``` Never spend more than you earn Buy what you need first Pay off debt Always have cash to buy the things you need Keep an emergency fund Learn from the past Make long term goals ```

Question 42

What is interest?

Answer 42

Money earned on the money you save in a bank (or money charged on a loan from the bank)

Question 43

What is credit?

Answer 43

When you buy now and pay later | A noose around your neck

Question 44

What are a business's suppliers?

Answer 44

Business from which the business buys goods and services

Question 45

What is a loan?

Answer 45

Money borrowed from a bank or financial institution

Question 46

What is income?

Answer 46

Money earned by a business

Question 47

What does it mean to deposit?

Answer 47

Put money into a bank account

Question 48

What does it mean to withdraw?

Answer 48

Remove money from a bank account

Question 49

What is a current account?

Answer 49

A bank account used for daily transactions, sometimes known as a cheque account

Question 50

What is a transaction?

Answer 50

A business deal

Question 51

What is a source document?

Answer 51

A record of a transaction - eg. a receipt

Question 52

What does per annum mean?

Answer 52

per year

Question 53

What is an interest rate?

Answer 53

The percentage of interest you earn on your savings per year

Question 54

What is a tenant?

Answer 54

Someone who rents a building, house or flat

Question 55

What is property?

Answer 55

buildings, homes, offices or land

Question 56

What is insurance?

Answer 56

When a company agrees to pay for your future loss of (or damage to) your property in exchange for a monthly fee (called a premium)

Question 57

What is a statement of net worth?

Answer 57

a list of assets and liabilities

Question 58

What is investing?

Answer 58

taking money you have saved and doing something with it to make more money

Question 59

What is a deficit?

Answer 59

When your expenses exceed your income

Question 60

What is expenditure?

Answer 60

The money you spend