Keywords Flashcards
Start -up costs
The amount of money spent setting up a business before it starts trading
Operating costs
Money spent on a regular basis to keep a business running.
Income
Money which is paid into a business
Fixed costs ( indirect costs)
Expenditure on items which does not change with the number of items sold or produced
Variable costs (direct costs)
The costs which vary according to the number of items sold or produced.
Total costs
The total amount of money spent running a business overs a certain period of time e.g. a month
Revenue
Money received by a business
Expenditure
Money that a business spends
Overheads
the everyday running costs of a business
Profit
Occurs when revenue is more than expenditure
Loss
Occurs when expenditure is more than revenue
Breakeven
Occurs when a business has made enough money through sales to cover the cost of sales. there is no profit or loss at this moment
Budgeting
Planning the future expenditure and revenue targets with the aim of ensuring a profit is made.
Budgetary Control
The process of checking what is actually happening comparing this with the plan and taking action is things are not correct.
Cash inflows
The amount of money entering a business’s bank account
Cash outflows
The amount of money leaving a business’s bank account
Net cash flow
Difference between the cash inflow and outflow figures over a particular 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 charge.
Capital
Money spent by a business on items which should last a long time.
Cost of sales
The cost of producing a product.
Gross Profit
The money made from selling a product after the cost of producing the product has been deducted. Also known as margin.
Net profit
The money made from selling a product after all the costs (expenditure) have been deducted from the gross profit.
Financial statements
Summary of the financial activities of a business
Income statement ( profit and loss account)
outlines income from sales and cost of sales as gross profit and the expenses and overheads leaving net profit.
Trading account
The first section of the income statement. Details income from sales and cost of sales as gross profit.
Financial year
The trading period over which a business collects information for their annual income statement
Assets
Items that the business buys that normally last a long time, such as a van or computer, or money it is owed. Anything the business owns which is value
Debtors (or trade receivables)
People who owe money to the business for goods and services that they have received.
Trade payables
Traders whom the business owes money because they have supplied goods or services
Liabilities
Amounts of money which a business owes, think of this as the opposite of assets.
Fixed assets
items that the business must keep to be able to trade e.g. a van or a computer
Current assets
items which change with every transaction, such as stock debtors and cash in the bank. These can be turned into cash quickly if needed.
Current liabilities
Money that must be paid back within a year, such as money owed to suppliers or bank overdraft.
Long-term liabilities
Bank loans which must be repaid over a longer period
Share capital
Money invested by the owner, or shareholders.
Retained profits
Profit kept from the previous year.
Statement of financial position( balance sheet)
Shows how much the money is invested in the business and what it has been spent on.
Working capital ( net current assets)
Money the business can raise quickly
Reserves
Money that has been saved from a previous profitable year
