Business Organisations

Question 1

What is a business?

Answer 1

A business is an organisation that regularly enters into different transactions.

Question 2

What are the three types of business organisations?

Answer 2

Sole trader, company, partnership

Question 3

Define sole trader

Answer 3

Organisations that are owned and operated by one person, usually smaller

Question 4

Define partnership

Answer 4

These are organisations owned by two or more person working in common with a view to make a profit.

Question 5

What is usually the reason for a partnership?

Answer 5

The greater number of owners, increased availability of finance

Question 6

Define company

Answer 6

Organisations recognised in law as ‘persons’ in their own right.

Question 7

Can a company own assets?

Answer 7

Yes

Question 8

How does a company incur liabilities?

Answer 8

In its own name

Question 9

What are the two types of accounts?

Answer 9

Management accounting and financial accounting

Question 10

What does the type of acccount depend on?

Answer 10

What purpose the statements are being produced for

Question 11

How often are management accounts usually prepared?

Answer 11

Monthly to present timely financial and statistical info to business managers

Question 12

What does the management accounts info help?

Answer 12

Helps managers to run the business more effectively, making day to day, and short term decisions.

Question 13

How often are the financial accounts prepared?

Answer 13

Annually

Question 14

What is the benefit for the financial accounts?

Answer 14

People outside the business, such as owners, HMRC, HM Rvenue

Question 15

What are the two main financial statements?

Answer 15

The statement of profit or loss.
The statement of financial position

Question 16

What is the statement of profit and loss?

Answer 16

This is a summary of the businesses transaction , income and expenses, over a given period

Question 17

What is the statement of financial position ?

Answer 17

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

Question 18

What is the final product of the accounting system?

Answer 18

The financial statements are the final product

Question 19

Define sales revenue

Answer 19

Is income generated from the trading activities of the business

Question 20

Define the cost of sales

Answer 20

Is the cost of buying or producing the goods for resale

Question 21

Define gross profit

Answer 21

The profit remaining, after the cost of sales have been deducted from the sales revenue

Question 22

Define sundry income

Answer 22

Other types of income that aren’t generated by the primary trading activity of the business

Question 23

Define net profit or loss

Answer 23

The profit or loss remaining after expense have been deducted from the gross profit and sundry income