Unit 3 Flashcards
what are the 4 functions of money?
- legal tender
- unit of account
-means of exchange - store of value
factors that influence the role of money ?
- risks and rewards
- life stage
-external influences like inflation
-interest rates - culture / religious beliefs
what are the life stages that influence role of money
- adolescence
- childhood
- middle adulthood
-early adulthood - late adulthood
Why is it good to plan expenditure?
- avoid entering debt / unmanageable debt
-remaining solvent - good credit rating
-counter the effect of inflation
-set financial targets and goals - avoid bankruptcy
different methods of payment
Cash —> notes and cards
Debit card —> given when owning a current account
Credit card —> can borough funds from an institution
cheque —> written order to allow transfer of money
direct debit —> authorised third party withdrawal
standing order —>setting up regular payment into another account
prepaid card —> card loaded with specific amount
charged card —> allows spending management
store card —> a card for particular store and is issued by the retailer
BACS ( bankers automated clearing service) —> electronic transfer that takes several days to clear
CHAPS —> electronic payment made by the Bank of England
what are the types of current accounts?
basic —> customer at risk - no positive interest - basic facilities
Standard —> provides a debit card - interest on savings - online banking
Premium —> additional benefits like travel insurance - cash back - pay a monthly fee
student —> offers basic banking services - incentives like discounts on shopping or cheaper travel
what are the different types of borrowing?
- Overdraft
- personal loan
- Hire purchase
- Mortgage
- credit card
- payday loan
Saving and investing
ISAs —> saves money tax free and earn
Deposit saving account —> account that money can enter but not taken out
Govt bond —> investing in another govt with fixed gained return
Shares —> unit of capital in a company thus expressing ownership
Pension —> % of income is put into a scheme for when retired
What are the types of insurance ?
Life insurance —> protection for those who face financial impact after a loved ones death
pet insurance
Car insurance —> third party. -Third party + fire + theft. -Fully comprehensive
types of financial institutions
Banks —> provide personal loans
building societies —> run my members and grant financial services
credit unions —> grant each other their saving to build credit
NS&I —> buy premium bonds
Insurance companies —> financial intermediary that helps protect consumers from hazards
pension companies —> manage pension schemes
pawnbrokers —> trade cash for valuables
payday loan vendors —> grant loans for those in between payment
how do financial services communicate with customers?
- phone call
- mobile banking
- posters
- leaflets
-text - face to face
-letters
how are consumers protected?
FCA —> ensure markets are honest and fair to consumers and operate competitively
FSCS —> provide up to £85,000 compensation when a financial institution fails
FOS —> resolves disputes while giving impartial judgement
Where can consumers seek advice and guidance?
Citizen advice bureau
independent financial advisors
price comparison websites
money helper/ money advice service
debt councellors
Individual voluntary agreement
bankruptcy
what is the purpose to accounting ?
HMRC
monitor
control
legal compliance
measure
record
manage
Types of income
Capital income —> long term source of income used to fund non current asset purchases —> share capital , owners capital, mortgage, loans , debenture
Revenue income —> income from trading activities —> rent received, credit and cash sales, interest received, discount received
types of expenditures
Capital expenditure —> when money is used to buy non current assets —> fixtures & fittings , vehicles, buildings, patent , goodwill
Revenue expenditures —> day to day spending from business operations —> insurance, admin, depreciation, wages, utility bills, interst paid
what are the internal sources of finance?
Retained profit —> profit going back into the business
sale of asset —> selling items of value that could be tangible or intangible
net current asset
what are the external sources of finance?
owners capital —> the owners savings
crowd funding —> using the internet to raise money for an innovation
Venture capital —> a form of private equity in a company in exchange for money
debt factoring —> passing the debt on to a third party and then repaying them at a discounted price
leasing —> making installments on equipment to use for a period of time
peer to peer lending —> directly loaning money to a peer without using a bank
trade credit —> allowing consumers to pay within a period of time rather than at the business transaction such as a 30 day period
invoice discount
grants
donations
mortgage
loan
what is a cash flow forecast ?
shows how cash flows into and out the business and through what
