Income, costs and financial terminology- pages 21-23 Flashcards
When do enterprises receive income?
Enterprises receive income (money) from the sale of goods and services and from assess
Main types of revenue
- Cash sales
- Credit sales
- Commission received
- Maintenance contracts
- Repairs
What is cash sales?
From over-the-counter sales
What is credit sales?
From sales using a method of credit such as a credit card
What is maintenance contracts?
When a enterprise agrees to regularly service a product, usually annually, to keep it in working order
What is commission received?
When a enterprise acts as a agent for another enterprise and receives a percentage of every sale
Ways to generate income from assets
- Rent out part of the enterprise’s premises to another enterprise
- Sell assets such as property or equipment to raise money
- Lease or hire out equipment to another enterprise
- Invest in another enterprise to receive a share of its profits
- Put spare cash into an account that pays interest
What is a start-up cost?
This is before an enterprise starts trading, it usually spends money on setting up
What is a running cost?
This is once an enterprise is trading, it will have day-to-day costs
What happens before an enterprise has a income?
The enterprise has to find the finance to pay its start up costs
Sources of finance for start up cost money are…
- Owners own money
- money loaned or given by family and friends
- business loan
- an investor
What the the two main types of running costs?
- Variable costs
- Fixed costs
Common fixed costs
- Rent
- Insurance
- Business rate
- Heating and lighting charges
What will start-up costs be influenced by?
The type of enterprise
A example of start-up cost being influenced…
A high street retailer will requires a shop premises, shop fittings and items to sell
What are variable costs related to?
They are directly related to the number of items produced or sold, for example; the more orders a clothing manufacturer receives for t-shirts, the more material it will need to produce them
Name the two types of financial statements
- Statement of comprehensive income
- Statement of financial position
Financial terminology in Statement of comprehensive income
- Turnover
- Cost of sales
- Gross profit
- Expenses
- Net profit
- Retained profit
Financial terminology in Statement of financial position
- Fixed assets
- Current assets
- Owner’s capital
- Current liabilities
- Long-term liabilities (non-current liabilities)
- Debtors (trade receivables)
- Creditors (trade payables)
What is repairs?
When a enterprise repairs or services a product previously purchased by a customer
