Commerce - T4 Flashcards
What is accounting
the systematic process of identifying, measuring and communicating financial information about a entity to interested parties
What is revenue
the income from a business has from its normal business activities, usually from the sale of good and services to customers
What are expenses
the economic costs a business incurs through its operations to earn revenue
What is profit
the amount of revenue recieved is greater than the expenses
What is a loss
when expenses are greater than revenue
What is a service business
provides intangible products eg cleaning, education, beauty parlours
What is a trading business
one which sells products through outlets eg dairy or clothing store
What are bad debts
Where a customer has bought something on credit which they cannot pay for the business writes off the debt
What does discount allowed mean
where businesses offer a discount for prompt payment when they pay by credit
What are assets
items or resources the business owns even if they aren’t fully paid for
What are liabilities
money the business owes to other people/firms
What is equity
the owner’s contribution to set-up the business, also known as capital
What are trade receiveables
credit customers that owe the firm money
What are trade payables
suppliers to whom the firm owes money
What are current assets
assets that are likely to turn into cash in the next year
What are non-current assets
assets that are expected to be in use for more than 1 year
What are non-current liabilities
liabilities that are not due for full repayment in the next year eg long-term bank loans
What are current liabilities
liabilities that are due for full repayment in the next year eg bank overdraft and trade payables
How to calculate owner’s equity
capital + net profit (or loss) minus drawings
What are drawings
money taken out of the business by the owner for their personal use
