Key terms Flashcards
Start up costs
The amount of money spent setting up a business before it starts trading.
Operating costs (or running costs)
Money spent on a regular basis to keep a business running.
Income
Money which is paid into a business.
Fixed costs( or indirect costs)
Expenditure on items which does not change with the number of items sold or produced
Variable costs (or direct costs)
Costs which vary according to the number of items sold or produced.
Total costs
The total amount of money spent running a business over a certain period of time (e.g. a month).
Expenditure
Money that a business spends.
Overheads
The everyday running costs of the business.
Profit
Occurs when revenue is more than expenditure .
Loss
Occurs when expenditure is more than revenue.
Budgeting
Planning future expenditure and revenue targets with the aim of ensuring a profit is made.
Budgeting control
The process of checking what is actually happening, comparing this with the plan and taking action if things are not correct.
Cash inflows (revenue)
The amounts of money entering a business’s bank account.
Cash outflows (expenditure)
The amounts of money leaving a business’s bank account.
Net cash flow
The difference between the cash inflow and outflow figures over a particular time period.
Cash balance
The amount of money forecast to be in the bank account after the net cash flow figure has been added or subtracted from the existing bank balance.
Overdraft
This occurs if a business pays more out of its bank account than it has in credit. The bank may allow this but will make an extra change.
Capital
Money spent by the business on items which should last a long time (assets).
Cost of sales
The cost of producing a product.
Gross profit
The money made from selling a product (the sales revenue) after the cost of producing that product (cost of sales) has been deducted.
Net profit
The money made from selling a product after all costs (expenditure) have been deducted from the gross profit.
Financial year
the trading period over which a business collects information for their annual income statement (for example, a business might have a financial year that starts on 1 May and ends on 30 April).
Assets
Items that a business buys that normally last a long time, such as a van or a computer, or money it is owed.
Debtors (or trade receivables)
People who owe money to the business for goods or services they have received. Trade payables are traders to whom the business owes money because they have supplied goods or services.
