Business Organisations Flashcards
What is a business?
A business is an organisation that regularly enters into different transactions.
What are the three types of business organisations?
Sole trader, company, partnership
Define sole trader
Organisations that are owned and operated by one person, usually smaller
Define partnership
These are organisations owned by two or more person working in common with a view to make a profit.
What is usually the reason for a partnership?
The greater number of owners, increased availability of finance
Define company
Organisations recognised in law as ‘persons’ in their own right.
Can a company own assets?
Yes
How does a company incur liabilities?
In its own name
What are the two types of accounts?
Management accounting and financial accounting
What does the type of acccount depend on?
What purpose the statements are being produced for
How often are management accounts usually prepared?
Monthly to present timely financial and statistical info to business managers
What does the management accounts info help?
Helps managers to run the business more effectively, making day to day, and short term decisions.
How often are the financial accounts prepared?
Annually
What is the benefit for the financial accounts?
People outside the business, such as owners, HMRC, HM Rvenue
What are the two main financial statements?
The statement of profit or loss.
The statement of financial position
What is the statement of profit and loss?
This is a summary of the businesses transaction , income and expenses, over a given period
What is the statement of financial position ?
This is a statement of the assets and liability’s of the business at a given date. This date is the end of the period covered by the statement of profit and loss
What is the final product of the accounting system?
The financial statements are the final product
Define sales revenue
Is income generated from the trading activities of the business
Define the cost of sales
Is the cost of buying or producing the goods for resale
Define gross profit
The profit remaining, after the cost of sales have been deducted from the sales revenue
Define sundry income
Other types of income that aren’t generated by the primary trading activity of the business
Define net profit or loss
The profit or loss remaining after expense have been deducted from the gross profit and sundry income
