Key Terms

Question 1

start up costs

Answer 1

The amount of money spent setting up a business before it starts trading.

Question 2

operating costs (or running costs)

Answer 2

money spent on a regular basis to keep business running.

Question 3

income

Answer 3

money which is paid into a business.

Question 4

fixed costs (or indirect costs)

Answer 4

expenditure on items which does not change with the number of items sold or produced.

Question 5

variable costs (or direct costs)

Answer 5

costs which vary according to the number of items sold or produced.

Question 6

total costs

Answer 6

the total amount of money spent running a business over a certain period of time (e.g. a month)

Question 7

expenditure

Answer 7

money that a business spends.

Question 8

overheads

Answer 8

the everyday running costs of the business .

Question 9

profit

Answer 9

occurs when revenue is more than expenditure.

Question 10

loss

Answer 10

occurs when expenditure is more than revenue.

Question 11

budgeting

Answer 11

planning future expenditure and revenue targets when the aim of ensuring a profit is made.

Question 12

budgeting control

Answer 12

the process of checking what is actually happening, comparing this with the plan and taking action if things are not correct.

Question 13

cash inflows (revenue)

Answer 13

the amounts of money entering a business’s account.

Question 14

cash outflows (expenditure)

Answer 14

the amount of money leaving the business’s bank account.

Question 15

net cash flow

Answer 15

the difference between the cash inflow and outflow over a particular time period.

Question 16

cash balance

Answer 16

the amount of money forecast to be in the back account after the net cash flow figure has been added or subtracted from the existing bank balance.

Question 17

overdraft

Answer 17

this occurs id a business pays more out of its bank account than it has in credit. the bank may allow this but will make extra charge.