Comp 3 LA b Flashcards
Financial records
Documents that give an accurate record of all trading.
Start-up costs
Spend on items before enterprise can start trading.
Running costs
Day to day costs to run the enterprise.
Fixed costs
Costs that have to be paid even if no goods are sold.
Variable costs
Costs directly related to number of items sold.
Turnover
Total revenue received in a financial period.
Cost of sales
Direct costs to make the products sold.
Expenses
Indirect cost to run the enterprise eg: rent.
Assets
Something the enterprise owns.
Liabilities
Something the enterprise owes.
Capital
Finance used to start or grow the business.
Statement of comprehensive income
Shows how an enterprise has performed financially over a period of time.
Statement of financial position
Shows the finance that has been invested in the enterprise and where it has been spent over a period of time.
Pofitability
Enterprise’s ability to turn revenue into profit.
Liquidity
Ability of the enterprise to pay its debts.
Creditor
Someone who is owed money.
Debtor
Someone who owes money.
Trade credit
Purchase made and payment made later eg: next month.
Retained profit
Profit earned and kept from previous financial year.
Insolvency
Unable to pay debt so cease trading.
Revenue
sales x selling price per unit
Total variable costs
sales x variable cost per unit
Total costs
fixed costs + total variable costs
Profit
total revenue – total costs
Gross profit
Turnover – cost of sales
Net profit
gross profit - expenses
Net current assets
current assets – current liabilities
Gross profit margin %
= (gross profit ÷ turnover) x 100
Net profit margin %
= (net profit ÷ turnover) x 100
Current ratio
= current assets ÷ current liabilities : 1
Liquid capital ratio
(current assets – inventories) ÷ current liabilities : 1
Working capital
net current assets
Purchase order
List types, quantities and agreed prices.
A legal offer to buy goods/services.
Delivery note
States what has or hasn’t been delivered.
Goods received note
Confirms which goods have been received.
Credit note
Goods returned and customer gets refund.
Invoice
Amount owed and date to be paid.
Receipt
Proof of purchase.
Statement of account
Summary of recent transactions.
Cash
Was the most traditional form of payment for small items.
Credit cards
Agreed sum of credit paid off monthly with interest added.
Surcharge
Cost to a business if accept credit card payments.
Debit card
Payment taken from your bank account – PIN/contactless.
Direct debit
Transfer of money on agreed date to a business.
Payment technologies
Paypal, online checkouts.
Fixed assets
Does not change in the short term.
Eg: retail store, machinery, factory, fixtures and fittings.
Current assets
Will change with every transaction and can be changed into cash quickly.
Current liabilities
Short term debts that must be paid back within a year.
Long term liabilities
Long term debts that will take longer than a year to pay back.
