Business Organisations (Ch 2) Flashcards
What is a Sole trader?
Organisations that are owned and operated by one person.
What is a Partnership?
These are organisations owned by 2 or more persons working in common with a view to making a profit.
What is a Company?
These are organisations recognised in law as ‘persons’ in their own right. A company may own assets in and incur liabilities in its own name. The accounting of these organisations must meet certain minimum obligations imposed by legislation, e.g. via company law and oter regulations.
What are Management accounts?
These are usually prepared on a monthly basis to present timely financial and statistical information to business managers. This information helps managers to run the business more effectively, making day-to-day and short-term decisions.
What are Financial accounts?
These are prepared annnually, mainly for the benefit of people outside the management of the business, such as owners of the business (e.g. shareholders who hae appointed directors to run he business on their behalf), HM Revenue and Customs (HMRC), banks, customers, suppliers, supplier and the government.
What is Sales Revenue?
The income generated from the trading activties of the business.
What is Cost of Sales?
The cost of buying or producing the goods for resale.
What is Gross Profit?
The profit remaining, after the cost of sales have been deducted from sales revenue.
What is Sundry Income?
Other types of income that ren’t generated by the primary trrading activites of the business.
What are Expenses?
The day-to-day running costs of the business.
What is Net Profit or Loss?
The profit or loss remaining after expenses have been deducted from gross profitand sundry income.
What is an Asset?
Something owned or controlled by a business, available for use in the business.
What is Non-current Asset?
An asset acquried for long term use in the business and not resold as part of the trading activities, for example the purchase of a delivery van.
What is Current Asset?
A short-term asset of the business which is to be used in the business in the near future i.e. cash or something that will soon be converted into cash.
What is a Receivable?
It is an example of a current asset. A receivable is someone who owe the business money i.e. a credit customer.
What is Non-current Liability?
An amount owed by the business and due to be repaid after more than 12 months.
What is Liability?
An amount owed by the busienss, i.e. an obligation to pay money at some point in the future.
What is a Payable?
An exmaple of liability. A payable is someone the usiness owes money to i.e. a credit supplier.
What is Capital?
The amount which the owner has invested in the business. This is owed back to the owner and could be regarded as a special liability of the business.
What are Drawings?
The amounts withdrawn by the business owner for their own personal use: drawings may be of cash or items of inventory.
What is Capital Expenditure?
The purchase of, or improvement of, non-current assets.
What is Revenue Expenditure?
The day-to-day running costs of the business.
What is Capital Income?
The income from the sale of capital aseets of the business.
What is Revenue Income?
Income generated from the sale of goods or services.
