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BUSINESS Flashcards

0
Q

FINANCIAL NEEDS

Give the 5 life stages and the financial needs to that stage

A

Childhood - limited needs
Adolescence - want to be more independent
Young Adult - looking to be more independent. Uni/car/going out etc
Middle age - support family, wedding, mortgage
Old age - less dependents, may want to downsize home

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1
Q

CREDIT UNIONS

What do the members of the credit union have?

A

The members have the right to vote

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2
Q

CREDIT UNIONS

define what a credit union is

A

a credit union is a financial institution that is charity based. They store money for the members

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3
Q

CREDIT UNIONS

give advantages and disadvantages of credit unions

A

Advantage - secure place to store the money
you’re a member not just customer
lower fees
better customer service
they are non-profit financial institutions

Disadvantage - savings only protected up to £85,000 anything over isn’t protected.
Lacks business drive of commercial banks.
must become a member to join

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4
Q

CREDIT UNIONS

give advantages and disadvantages of credit unions

A

Advantage - secure place to store the money
you’re a member not just customer
lower fees
better customer service
they are non-profit financial institutions

Disadvantage - savings only protected up to £85,000 anything over isn’t protected.
Lacks business drive of commercial banks.
must become a member to join
there are less ATM’s

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5
Q

FUNCTIONS OF MONEY

there are 4 functions of money, name these

A

unit of account
legal tender
store of value
means of exchange

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6
Q

FUNCTIONS OF MONEY

define unit of account

A

place a monetary value on goods/services

shows how much something is worth

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7
Q

FUNCTIONS OF MONEY

define legal tender

A

the recognized legal form of payment

coins and notes etc

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8
Q

FUNCTIONS OF MONEY

define means of exchange

A

money allows us to trade

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9
Q

FUNCTIONS OF MONEY

define store of value

A

allows us to use it in the future as money keeps its value

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10
Q

PLANNING EXPENDITURE

define what planning expenditure is

A

expenditure is money that is paid out

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11
Q

ROLE OF MONEY

what are the 6 factors to attitudes of money

PLCLEI

A 
personal attitudes
life stages
culture
life events
external influences
interest rates
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12
Q

DEFINE CREDIT RATING

A

credit rating is the score given to individuals on how likely they are to repay debts

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13
Q

DEFINE INTEREST RATES

A

the cost of borrowing money or the reward for saving money

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14
Q

DEFINE BANKRUPT

A

when individual or organisation legally states its inability to repay debts

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15
Q

DEFINE SOLVENT

A

the ability to meet day-today expenditure and repay any debts

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17
Q

METHODS OF PAYING

give 14 methods of paying and a brief explanation of each method

A

cash - notes and coins
debit card - card issued by banks to pay with, money is deducted from current account
credit card - allowing customers to delay payments
cheque - written order transferring money from one account to another
electronic transfer - payment transferred directly
direct debit - third party withdrawing money on set date
standing order - agreement with bank to transfer a sum of money on a set date
pre-paid card - money uploaded to a card and can be spent, the sum will be deducted
contactless card - cards with antennae allowing money to be transferred when it reaches a terminal
charge card - issued by financial institutions, customers can delay payment but must be paid in full
store card - retail outlet for customers so they can delay payments
mobile banking - carry out transactions using mobile devices
Bankers Automated Clearing Service (BACs. Faster Payment) - system allowing transfers from one account to another
Clearing House Automated Payment systems (CHAPS) - allows transfer of payments directly from one account to another

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17
Q

INTERACTING WITH CUSTOMERS

give the five ways of banks interacting with customers

A

branch, telephone, online, postal, mobile

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18
Q

METHODS OF PAYING

give an advantage and disadvantage to these methods of paying:
cash, debit card, credit card, cheque, electronic transfer, direct debit, standing order, pre-paid card, contactless card, charge card, store card. mobile banking, BACS and CHAPS.

A

cash - most wide form of paying but can be lost and stolen
debit card - no need to carry cash, used online but not accepted for small transactions
credit card - suitable for online transactions but interest is charged if not paid back in time
cheque - low risk form of payment but it is viewed as old fashioned
electronic transfer - no additional cost for transferring money but risk of loss of money if it’s set up wrong
direct debit - quick and easy to set up but payer determines how much is transferred making it hard for payee to budget
standing order - easy to set up and cancel but payments are continued to be paid unless cancelled
pre-paid card - can set a budget and no protection if its lost
contactless card - secure method to pay but still not widely accepted
charge card - reduces risk of debt but there is an annual fee
store card - short period of credit that’s interest free but only accepted in certain store
mobile banking - secure method but features are limited
BACS - no additional costs but limit is set on amount that can be transferred in one transaction
CHAPS - no limit on amount that can be transferred in single transaction but there’s a fixed charge

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19
Q

INTERACTING WITH CUSTOMERS

give an advantage of each method of banks interacting with customers

A 
branch - additional services and advice
telephone - no additional charges
online - available 24/7, convenient
postal - no technology is needed
mobile - available 24/7, no additional charges
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20
Q

INTERACTING WITH CUSTOMERS

give a disadvantage of each method of banks interacting with customers

A 
branch - restricted to opening times
telephone - risk of fraud and theft
online - risk of hacking and cyber crime, facilities limited
postal - slow due to postal system
mobile - risk of theft, hacking
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21
Q

CITIZENS ADVICE

What is the citizens advice?

A

an organisation ran by charity to help the community with a wide range of things

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22
Q

CITIZENS ADVICE

what do the citizens advice give advice on?

A

financial and non-financial issues

e.g. tax, benefits, court etc

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23
Q

CITIZENS ADVICE

Give an advantage of the citizens advice

A

its free

face-to-face, online, telephone, wide range of areas covered

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24
Q

CITIZENS ADVICE

give a disadvantage of the citizens advice

A

they are just volunteers, not professionals so their knowledge is limited

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25
Q

CURRENT ACCOUNTS

what are the four types of current accounts?

A

standard
packaged, premium
basic
student

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26
Q

CURRENT ACCOUNTS

give an advantage of each current account type

A

standard - no charges on credit balances. convenient for receiving regular payments
packaged, premium - no charges on credit balances. convenient for reviewing regular payments
basic - available to customers with low credit rating. easy first step for post bankrupt people
student - offers bonuses. student loans handled easily

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27
Q

CURRENT ACCOUNTS

give a disadvantage of each type of current account

A

standard - high charges on use of overdraft.
packaged, premium - monthly charge for having the account
basic - limited faculties (no card, no overdraft)
student - overdraft facilities could encourage overspending

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28
Q

CURRENT ACCOUNTS

define current account

A

account with bank or building society for frequent use

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29
Q

CURRENT ACCOUNTS

define overdraft

A

ability to withdraw money that you do not have from current account

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30
Q

TYPES OF BORROWING

give 6 types of borrowing

A 
overdraft
personal loans
hire purchase 
mortgages 
credit cards
payday loans
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31
Q

CURRENT ACCOUNTS

give some features of a current account

A
  • rate of interest paid on positive balances
  • rate of interest charged of negative balances
  • overdraft limit
  • charges on unauthorised overdrafts
  • additional incentives
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32
Q

TYPES OF BORROWING

give an advantage and disadvantage of overdrafts

A

can be paid off without penalties

not the cheapest type of borrowing

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33
Q

TYPES OF BORROWING

give an advantage and disadvantage of personal loans

A

regular pre-agreed payments make planning easy

not suitable for short term loans

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34
Q

TYPES OF BORROWING

give an advantage and disadvantage of hire purchase

A

spreads cost of expensive item over a period of time

interest charges higher than traditional loans

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35
Q

TYPES OF BORROWING

give an advantage and disadvantage of mortgages

A

allows customer to spread cost of expensive items over period of time. e.g. house
penalties applied to early repayment

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36
Q

TYPES OF BORROWING

give an advantage and disadvantage of credit cards

A

provides some protection on purchases

can encourage overspending

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37
Q

TYPES OF BORROWING

give an advantage and disadvantage of payday loans

A

help solve short term cash flow problems

interest rates are high

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38
Q

SAVING AND INVESTING

what are the 6 types of saving / investing

A 
individual savings account (ISA's)
deposit and savings accounts 
premium bonds
bonds and gifts
shares 
pensions
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39
Q

SAVING

give the risks and rewards for saving

A

risks: low or zero risk. money saved is guaranteed for the future.
inflation can reduce spending power

rewards: interest payments. financial security

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40
Q

INVESTING

what are the risks and rewards for investing?

A

risks: investments can go wrong. no guarantee of a return
rewards: if successful there is potential for high financial return. can be exciting

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41
Q

CREDIT UNIONS

since credit unions are owned by their members, what is an advantage for them?

A

the costs can be kept down, allowing for higher interest rates

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42
Q

ROLE OF MONEY

personal attitudes…how can personal attitudes affect the role of money?

A

Individuals will vary in attitude to risk. Some people are willing to take more risks and even enjoy taking more risks. Some people may rather save. Family’s attitude to money may effect you. E.g. They may say saving is good so you think saving is good.

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43
Q

ROLE OF MONEY

Life stages…how can life stages affect attitudes to money?

A

From childhood to adulthood your financial needs change, childhood you have limited financial needs. Adulthood you have financial needs, a mortgage, wedding, family etc

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44
Q

ROLE OF MONEY

If interest rates are high, what will people be more likely to do?

A

They will be more likely to save money

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45
Q

ROLE OF MONEY

If interest rates are low, what will people be more likely to do?

A

They will be more likely to borrow money

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46
Q

METHODS OF PAYING

There are 7 more ways to pay, these are less popular. Name this and give a brief explanation of each.

A

Pre-paid card - money loaded onto card, transactions can be made reducing amount on card
Contactless card - cards with antennae allowing money to be transferred when card touches terminal
Charge card - issued by financial institutions allowing customers to delay payments, must pay when statement is issued
Mobile banking - carry out financial transactions using mobile devices
BACS Faster payment - allows payments to be transferred directly from one bank to another
CHAPS - allows transfer of payments directly from one bank to another

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47
Q

METHODS OF PAYING

Give a advantages and disadvantages of pre-paid cards

A

Can set a budget. If its lost or stolen, the loss is limited to whats on the card. Effective way of controlling spending.

No protection if its lost. Requires initial fee sometimes to set up.

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48
Q

METHODS OF PAYING

Give advantages and disadvantages of contactless cards

A

Gaining in popularity. Secure method.

Often accepted in small amounts. Not widely accepted.

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49
Q

METHODS OF PAYING

Give advantages and disadvantages of charge cards

A

Reduces risk of debts. Allows short period of credit. Avoids needs to carry cash.

Must be paid in full each method. Annual fixed fee.

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50
Q

METHODS OF PAYING

Give advantages and disadvantages of store cards

A

Allows short period of credit that’s interest free. Loyalty schemes.

Only accepted in issuing store. Can encourage overspending. Interest paid on outstanding balances.

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51
Q

METHODS OF PAYING

Give advantages and disadvantages of mobile banking

A

Convenient. Secure.

Features still limited.

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52
Q

METHODS OF PAYING

Give advantages and disadvantages of BACS

A

Faster payment allows instant transfers. No additional costs. Can be accessed in different ways.

Not offered by all banks. Limit set on amount that can be transferred in one time.

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53
Q

METHODS OF PAYING

Give advantages and disadvantages of CHAPS

A

Transfers can be made the same day. No limit on amount that can be transferred in one transaction.

Fixed charge per transaction.

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54
Q

INSURANCE

Define what insurance is.

A

An agreement with third party to provide compensation against financial loss in line with policy.

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55
Q

INSURANCE

Define what premiums are

A

Regular payments made by someone to insurance company to provide protection.

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56
Q

INSURANCE

What is car insurance? What are the features?

A

Legal requirement to insure a car that goes on a road.
The degree of the cover will vary depending if the third party is fully comprehensive or not.
Protects driver, passengers and other road users.

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57
Q

INSURANCE

What is life assurance / insurance?

A

Life assurance is a policy to pay a lump sum upon death. Life insurance is for a set period of time to pay a lump sum if you die within that period.
If mortgage lender dies with this the next a kin will get mortgage paid off.

58
Q

INSURANCE

What is home and contents insurance?

A

Covers the physical building.
Contents insurance covers physical items in the house.
Items can be insured when a person is using them away from home as well as inside the house.

59
Q

INSURANCE

give an advantage and disadvantage of car insurance

A

protects self against theft and damage, protects damage caused to 3rd party but premiums can be high depending on level of risk (younger drivers is more expensive)

60
Q

INSURANCE

give an advantage and disadvantage of home and contents insurance

A

contents are protected both when inside and outside the house and some items cannot be replaced such as expensive paintings.

61
Q

INSURANCE

give an advantage and disadvantage of life assurance and insurance

A

provides peace of mind to family following bereavement of homeowner but if the policy holder does not die within period of life insurance no payment is made

62
Q

INSURANCE

give an advantage and disadvantage of travel insurance

A

provides protection against cancellation and delays but there is an additional cost when traveling abroad

63
Q

INSURANCE

give an advantage and disadvantage of pet insurance

A

avoids expensive vet fees, but it is an additional cost to protect against the unexpected

64
Q

INSURANCE

give an advantage and disadvantage of health insurance

A

if used to fund private health care, sometimes quicker treatment and better facilities but it will not cover pre-known conditions

65
Q

FINANCIAL INSTITUTIONS

What are the 9 types of financial institutions?

A 
Bank of England 
Banks
Building societies
Credit unions
National savings and investments
Insurance companies
pension companies
Pawnbrokers
Payday loans
66
Q

FINANCIAL INSTITUTIONS

Give some advantages and disadvantages of the Bank of England

A

The Bank of England lends to banks, it sets interest rates. But it is not a bank for members of the public

67
Q

FINANCIAL INSTITUTIONS

Give some advantages and disadvantages of banks

A

They offer a range of services and account types
Provide a secure place to store money
But savings are only protected up to £85,000, so if the bank goes bankrupt then anything saved over this is lost

68
Q

FINANCIAL INSTITUTIONS

Give some advantages and disadvantages of building societies

A

They offer a range of services and account types and provide a secure place to store money but savings are only protected up to £85,000 so if the building society goes bankrupt then anything over is lost

69
Q

FINANCIAL INSTITUTIONS

Give advantages and disadvantages of credit unions

A

Offers a range of services and account types and a secure place to store money
But savings are only protected up to £85,000 so anything over is lost and may lack the business drive of a commercial bank

70
Q

FINANCIAL INSTITUTIONS

Give advantages and disadvantages of insurance companies

A

They protect against the unexpected, they are easy regular monthly payments making planning easy. But premiums are assessed on the estimate degree of risk

71
Q

FINANCIAL INSTITUTIONS

Give advantages and disadvantages of national savings and investments

A

They are backed by the government so there is 100% security. Offers additional services and methods of paying
But the rates are variable and it is not as easy to access due to lack of presence

72
Q

FINANCIAL INSTITUTIONS

Give an advantage and disadvantage of pension companies

A

Provides a structure to help plan for financial security after retirement and poor investment decisions by the pension company at result in a disappointing return

73
Q

FINANCIAL INSTITUTIONS

Give an advantage and disadvantage of pawnbrokers

A

Quick way of acquiring money needed for short period of time and interest is not charged
But the amount given for the asset is fine substantially lower than its actual worth

74
Q

FINANCIAL INSTITUTIONS

Give advantages and disadvantages of payday loans

A

A quick way of acquiring money for a short period of time but interest charges are usually very high

75
Q

CONSUMER PROTECTION

What does the financial conduct authority (FCA) do?

A

The FCA is an independent organisation with remit to regulate the actions of providers of financial services
It’s funded by membership fees charged to financial service providers

76
Q

CONSUMER PROTECTION

What does the FCA concentrate on?

A

It concentrates on 3 things: authorisation - permitting financial service providers to trade
Supervision - ensuring procedures and practices are in the interest of the consumer
Enforcement - using powers to ensure standards are maintained

77
Q

CONSUMER PROTECTION

The financial ombudsmen service (FOS, what is it?

A

The FOS is an organisation appointed by the government to represent the interests of the consumer in disputes with financial service providers
Funded by compulsory fees charged to all regulated financial institutions and additional fees when actions are taken against an institution
The FOS becomes involved in disputes only if they cannot be satisfactory sorted between the consumer and the finance institution prior to involving the FOS

78
Q

PERSONAL FINANCE

what are the features of financial institutions?

A

they offer financial services to businesses and individuals. You can withdraw money and deposit money. you can make investments and have credit.

79
Q

PERSONAL FINANCE

Name the different organisations of financial institutions?

A

bank of England, banks, building societies, credit unions, national savings and investments, insurance companies, pension companies, pawnbrokers, payday loans,

80
Q

PERSONAL FINANCE

Give 2 advantages and 2 disadvantages of the Bank of England

A

They are responsible for protecting financial stability of the economy. They set the interest rates to have a stable economy.
This is not a bank for members of the public in general. Can raise interest rates, means borrowing will be expensive.

81
Q

PERSONAL FINANCE

Give 2 advantages and 1 disadvantage of Banks

A

they offer a range of services and account types, it is a secure place to store money
Savings are only protected up to £85,000, if the bank goes bankrupt, anything over will be lost.

82
Q

PERSONAL FINANCE

Give 2 advantages and 2 disadvantages of Building Societies

A

they offer a range of services and types of accounts,secure place to store money.
Savings are only protected up to £85,000, if the Building Society goes bankrupt, anything over will be lost. may lack business drive of commercial bank

83
Q

PERSONAL FINANCE

Give 2 advantages and 2 disadvantages of Credit unions

A

offer range of services and account types, secure place to store money.
Savings are only protected up to £85,000, if the Credit Union goes bankrupt, anything over will be lost. may lack business drive of commercial bank

84
Q

FINANCIAL INSTITUTIONS

What are the features of the Bank of England?

A

the UK’s central bank that maintains healthy level of financial stability for the UK

85
Q

FINANCIAL INSTITUTIONS

What are the features of banks

A

an organisation that handles financial transactions and stores money for its customers

86
Q

FINANCIAL INSTITUTIONS

What are the features of building societies

A

organisations that handle financial transactions on behalf of its customers

87
Q

FINANCIAL INSTITUTIONS

What are the features of credit unions

A

Not-for-profit organisations that handle financial transactions and store money for their members

88
Q

FINANCIAL INSTITUTIONS

What are the features of national savings and investments

A

government-backed organisation that offers a secure saving option

89
Q

FINANCIAL INSTITUTIONS

What are the features of insurance companies

A

businesses that protect against the risk of loss in return for a premium

90
Q

FINANCIAL INSTITUTIONS

What are the features of pension companies

A

businesses that sell policies to individuals, either privately or through employers, this allows them to save now to fund retirement in the future

91
Q

FINANCIAL INSTITUTIONS

What are the features of pawnbrokers

A

businesses or individuals that loan money against the security of a personal asset, e.g an item of jewelry

92
Q

FINANCIAL INSTITUTIONS

What are the features of payday loans

A

these organisations offer short-term sources of finance used to bridge a gap between now and the next payday

93
Q

FINANCIAL INSTITUTIONS

Give 2 advantages and 2 disadvantages of National savings and investments

A

government backed, so there is security on savings, there are other additional services and methods to save
the interest rates are variable, and they are not easy to access as they are not popular on the high street

94
Q

FINANCIAL INSTITUTIONS

Give 2 advantages and 2 disadvantages of insurance companies

A

they protect against losses and financial expenses, you pay monthly in payments which makes it easy to plan and budget
the premiums are assessed on the estimated degree of risk, so it penalizes some members of society, they are profit-making so the premiums can be expensive

95
Q

FINANCIAL INSTITUTIONS

Give 2 advantages and 2 disadvantages of pension companies

A

it provides a structure to help plan for financial security after retirement, experts are employed o make investments decisions.
poor investment decisions by pension company can result in disappointing return, money already invested in pension company cannot be released prior to dates agreed in the policy

96
Q

FINANCIAL INSTITUTIONS

Give 2 advantages and 2 disadvantages of pawnbrokers

A

a quick way of acquiring cash needed for short period of time, there is no interest charged.
the amount given to the asset if often lower than its worth, if the money is not repaid within the agreed period of time the asset will be sold on

97
Q

FINANCIAL INSTITUTIONS

Give 1 advantage and 1 disadvantage of payday loans

A

quick way of aqcuiring cash for short amount of time.

interest charges are very high

98
Q

CUSTOMER PROTECTION IN RELATION TO PERSONAL FINANCE

What is the “Financial Conduct Authority (FCA)”. Give the features of the FCA

A

it is a independent organisation with a remit to regular the actions of providers to financial services.
Funded by membership charges to financial service providers

99
Q

CUSTOMER PROTECTION IN RELATION TO PERSONAL FINANCE

What does the FCA stand for

A

Financial conduct authority

100
Q

CUSTOMER PROTECTION IN RELATION TO PERSONAL FINANCE

What is the 3 key things the FCA organisation work focuses on?

A

Authorisation - permitting financial service providers to trade
Supervision - ensuring procedures and practices are in the interest of the consumer
Enforcement - using powers to ensure standards are maintained

101
Q

CUSTOMER PROTECTION IN RELATION TO PERSONAL FINANCE

What does the FOS stand for?

A

Financial ombudsmen service

102
Q

CUSTOMER PROTECTION IN RELATION TO PERSONAL FINANCE

What is the “Financial Ombudsmen Service (FOS)”

A

the FOS is an organisation appointed by the government to represent the interests of the consumer in disputes with financial service providers #
funded by compulsory fees charged to all regulated financial institution and additional fees when actions are taken against the institution
The FOS becomes involved in disputes only if they cannot be sorted between consumer and finial institution prior to involving the FOS

103
Q

CUSTOMER PROTECTION IN RELATION TO PERSONAL FINANCE

What is the “Financial services compensation scheme (FSCS)”

A

The FSCS is the organisation in the UK that will pay compensation to a consumer of financial services if the service provider is unable to
They protect all savers in banks and building societies up to £85,000

104
Q

CUSTOMER PROTECTION IN RELATION TO PERSONAL FINANCE

What is the “ Office of Fair trading (OFT)”

A

OFt is a government organisation that was established to regulate all markets, including financial markets
Their aim was to encourage fair practice, healthy competition between financial institutions
Since 2014 the responsibility of the OFT has been handed to the FCA

105
Q

CUSTOMER PROTECTION IN RELATION TO PERSONAL FINANCE

What is the “Legislation: consumer credit”

A

They are laws passed by the government in the UK, they enforce all regulation of any firm offering credit to consumers
Any firm offering credit must be registered with the FCA

106
Q

ADVICE AND GUIDANCE

name the places where you can go to get advice and guidance on personal finance, some are private and some are government ran

A 
The citizens advice
independent financial advisor (IFA) 
price comparison websites
money advice services
debt counsellors
individual voluntary arrangements (IVA's)
107
Q

ADVICE AND GUIDANCE

Give an advantage and disadvantage of the Citizens advice

A

it is a free service

they are trained volunteers, so they are not professionals and knowledge may be limited

108
Q

ADVICE AND GUIDANCE

Give an advantage and disadvantage of the Independent financial advisor (IFA) bankruptcy

A

The advice is offered by professionals in the field

The services have a charge

109
Q

ADVICE AND GUIDANCE

Give an advantage and disadvantage of the price comparison websites

A

easy to access 24/7

Advice is only available online or over the phone so no physical presence

110
Q

ADVICE AND GUIDANCE

Give an advantage and disadvantage of the debt counsellors

A

Advice is offered by professionals who specialise in debt management
The services have a charge

111
Q

ADVICE AND GUIDANCE

Give an advantage and disadvantage of the Individual Voluntary Arrangements (IVA’s) bankruptcy

A

they help manage debt repayment with regular payments, making planning easier
There is a setup and handling fee

112
Q

PURPOSE OF ACCOUNTING

Define Financial transactions

A

actions by a business that involve money either going into or out of a business

113
Q

PURPOSE OF ACCOUNTING

Define HM Revenue and Customs (HMRC)

A

It is a british government department responsible for collection of taxes

114
Q

PURPOSE OF ACCOUNTING

What is record transactions? How does it work?

A

Record transactions is a record of transactions made by the business, this is money coming in and money coming out (revenue and expenditure).
There is a bookkeeper that keeps the log of transactions made in the business

115
Q

PURPOSE OF ACCOUNTING

Why are recording transactions important?

A

If records of transactions are not made, then the business will not run smoothly, they will end up chasing payments, forgetting to pay bills and taxes. If this happens HMRC will be in contact

116
Q

PURPOSE OF ACCOUNTING

What is the management of the business?

A

there is a manager in the business, they are in control of planning, monitoring and controlling resources.

117
Q

PURPOSE OF ACCOUNTING

what is one of the responsibilities for the manager?

A

They must ensure that there is sufficient funds to pay wages, bills, buy new stock and other expenses

118
Q

PURPOSE OF ACCOUNTING

Compliance, businesses must comply with the law, how do they do this?

A

financial reports are governed by the laws. this ensures that the records give a fair and true picture of how the business is doing. businesses must comply with these laws because they have to make sure investors and stakeholders are always informed

119
Q

PURPOSE OF ACCOUNTING

Why must businesses comply with the laws of giving financial records?

A

Businesses must comply with the laws to ensure that investors and stakeholders are always informed

120
Q

PURPOSE OF ACCOUNTING

Complying with the law cab also help to prevent something else from happening to the business or person, what is this?

A

This lessens the risk against fraud

121
Q

PURPOSE OF ACCOUNTING

Define fraud

A

fraud is when an individual acquires money from a company for personal gain, through illegal actions

122
Q

PURPOSE OF ACCOUNTING

Measuring performance, what is this in a business?

A

measuring performance is when records are made of the business so that someone can measure how well the business is performing

123
Q

PURPOSE OF ACCOUNTING

Measuring performance, how can this be done? What indicates how well a business is doing?

A

Gross profit - the amount of money left after the cost of producing the good or service is deducted from the amount of sales revenue
Net profit - this is the smaller amount of profit made after all the other expenses are deducted from gross profit
Value owed to the business - the amount of money owed to the business for goods or services that have not yet been paid for
Value owed by the business - money the business owes to others for goods and services purchased but not yet paid for

124
Q

PURPOSE OF ACCOUNTING

Define profit

A

surplus achieved when total revenue from sales is higher than the total costs of the business

125
Q

PURPOSE OF ACCOUNTING

Define loss

A

shortfall suffered when total revenue from sales is lower than the total costs of the business

126
Q

PURPOSE OF ACCOUNTING

Define gross profit

A

sales revenue minus cost of goods sold (the costs of actual materials used to produce the quantity of goods sold)

127
Q

PURPOSE OF ACCOUNTING

Define sales revenue

A

quantity sold multiplied with the selling price

128
Q

PURPOSE OF ACCOUNTING

Define net profit

A

gross profit minus other expenses, e.g rent and advetising

129
Q

PURPOSE OF ACCOUNTING

Control, what is this?

A

accounting will control the flow of money in and out of the business, if any unusual activity is seen then this can be dealt with easily.

130
Q

PURPOSE OF ACCOUNTING

what can be tracked when accounting control is done?

A

The accountant can track the amount of money the business is owed, trade receivables, from sales and the amount the business owes, trade payables. This helps the business ensure it can pay day-to-day expenses

131
Q

PURPOSE OF ACCOUNTING

Define Trade Recieveables

A

money that is owed to the business from sales but is not yet paid for

132
Q

PURPOSE OF ACCOUNTING

Define Trade payables

A

money that the business owes from supplies but has not yet been paid for

133
Q

TYPES OF INCOME

What are the two categories of income?

A

Capital income

Revenue income

134
Q

TYPES OF INCOME

Capital income, what is it?

A

Capital income is money that is invested by owners or other investors to set up a business or buy equipment

135
Q

TYPES OF INCOME

Capital income, what is it used for?

A

it is usually used to buy things that will stay in the business for a medium to long time, such as equipment, vehicles or land these are called fixed assets

136
Q

TYPES OF INCOME

Define fixed assets

A

items of value owned by a business that are likely to stay in the business for more than a year, e.g. machinery

137
Q

TYPES OF INCOME

Capital income, loans, what is a loan?

A

a loan is money that is lent to a business owner, from a bank or another financial institution, it has to be paid back in a certain period of time

138
Q

TYPES OF INCOME

Capital income, what is a disadvantage of using loans?

A

there is a monthly interest charge on top of the money owed

139
Q

TYPES OF INCOME

Capital income, loans from banks. Can a bank say no to someone asking for a loan?

A

Yes, banks can say no to lending out money. They ask how the money will be spent by the business and will assess how able the business is to repay the sum. Loans usually come being secured against an asset

140
Q

TYPES OF INCOME

Capital income, loans. what can happen if a business owner is not able to repay the loan to the bank?

A

The banks loan is secured against an asset, so they can take the business owners asset off them if they cannot repay the sum, this is usually a house, or cars etc

141
Q

TYPES OF INCOME

Define asset

A

an item of value owned by an individual or firm

142
Q

TYPES OF INCOME

Capital income, mortgages, what is a mortgage?

A

a mortgage is similar to a bank loan, however it is for more money and the time to repay it is longer. Mortgages are secured against an asset, usually property

144
Q

TYPES OF INCOME

Capital income, shares, what are shares?

A

shares are when the businesses share money to its shareholders.

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