common terms

Question 1

Accounting period

Answer 1

The span of time covered by a set of financial statements

Question 2

Accruals

Answer 2

An accumulated debt

Question 3

Assets

Answer 3

Things the business owns

Question 4

Current assets

Answer 4

the short term assets used in day to day running - they have a life of less than one year for example, stock. They will be used within one year to generate revenue.

Question 5

Fixed assets

Answer 5

the long term assets with a useful life of more than a year for example, property or equipment

Question 6

Balance sheet

Answer 6

a snapshot of all the assets, liabilities and money in a business.

Question 7

Capital

Answer 7

cash or liquid assets

Question 8

Owners Capital

Answer 8

The owners money

Question 9

Cash flow

Answer 9

the movement of money in and out of the business

Question 10

Cash flow forecast

Answer 10

A prediction of cash flow over a future period

Question 11

Cash flow statement

Answer 11

A record of actual money transfer activities

Question 12

Direct costs

Answer 12

variable costs

Question 13

Indirect costs

Answer 13

fixed costs

Question 14

Fixed costs

Answer 14

never change no matter how many units are produced e.g. rent/van lease

Question 15

Variable costs

Answer 15

Change with the number of units produced e.g. raw materials/packaging

Question 16

Depreciation

Answer 16

the fall in value of an asset over time

Question 17

Income statement

Answer 17

a financial document that shows the income and expenditure to see of the business is making a profit or loss

Question 18

Liabilities

Answer 18

the debts you owe other parties

Question 19

Current liabilities

Answer 19

Creditors that must be paid within one year e.g. suppliers of raw materials

Question 20

Long term liabilities

Answer 20

creditors that are paid after more than one year

Question 21

Liquidity

Answer 21

a company’s ability to raise finance when it needs it