Business Finance Flashcards
accounting def
the recording of financial transactions to produce financial information.
recording transactions
.business owner/bookkeeper records all money going in and out of the business
.if not then get in trouble with HRMC
compliance
governed by laws to ensure any financial records give a fair and accurate picture of the business so stakeholders/investors are not misinformed
4 ways of measuring performance
gross profit
net profit
value owed to business
value owed by business
net profit
smaller amount of profit made after all other expenses are deducted from the gross profit
value owed to business
this is the money owed to the business from sales that have not yet been paid for
value owed by business
amount of money the business owes to others for goods or services purchased but not yet paid for
trade receivables
the amount of money the business is owed from sale of goods
trade payables
the amount the business owes
capital income
.money invested by owners/investors
.usually used for medium/long term things e.g: premises, vehicles, equipment
5 types of capital income
loan debenture owners capital shares mortgages
revenue income
.money that comes into the business from selling goods/providing services
5 types of revenue income (dircs)
discount received interest received rent received commission received sales
loan
A borrowed amount of money to be paid back usually with interest
debentures
.A loan agreement in writing between a borrower and lender
.Registered at Companies House
owners capital
The money that owners/shareholders have invested into their business
shares
The amount of a business a person owns. They can be bought/traded
mortgage
Legal agreement in which financial institutions (bank/b.society etc) lends money at interest in exchange for taking title of the debtor’s property
asset
An item of value owned by a company
sales
The activity of selling products/services
rent received
Money earned from the process of lending out assets
commission received
A payment made to employees based on the amount of sales they make
discount received
When a buyer of goods/services is granted a discount by the seller
interest received
An amount received for the use of money that is to be repaid in full at a specified time or on demand
expenditure def
.money spent by a business
.two categories: capital expenditure and revenue expenditure
capital items
.assets that will stay in the business for a long period of time
.non- current and intangible assets
non current assets
items owned by a business that will remain for a reasonable period of time
e.g land/premises, machinery/equipment and vehicles
tangible assets
capital expenditure
used to purchase capital items
revenue expenditure
short term expenses (typically less than 1 year)
tangible assets
assets which can be touched
intangible assets
assets which cannot be touched
revenue expenditure 2 e.g
salaries
cost of stock
capital expenditure 2 e.g
property
land
computers
furniture
