Business Booklet C
Define Accounting
Purpose of accounting is to provide the information that is needed for sound decision making.
What are Record Transactions.
Records of money coming in/out
Enables business ro keep track of payments
Advantages of recording transactions
Pay correct amount of cash.
Stay solvent.
What is the managment of business?
Planning, monitering current performance and making changes to improve business.
Advantages of managment of business
Allows business to plan.
Moniter Stock.
Control costs.
What is Compliance?
Making sure companys finances comply with laws & regulations
Advantages of Complaince.
Prevents fraud
Nothing illegal
What is measuring performance?
Measures how well the business is performing through gross/net profit. Costs. Sales Revenue, etc.
Advantages of measuring performance
Improves business
See where the business is strong/weak.
What does control do ?
Allows business to take control of its finances
Define Trade Recievables
Debts made by the sale of products/services
Define Trade Payables
Debts made by purchasing products or services
What is Capital Income?
Money used to set up the business, is a long term investment.
What is a loan?
Money lent to a business by investor like a bank. Must pay back loan + interest.
What is a mortgage?
Loan used to buy property.
Repossessed if not payed in time.
Loan of 25+ years.
What are shares?
Company can issue shares to raise capital.
Shareholders recieve income from dividends (share of profit)
What is Owner Capital?
Owner funds business through their own personal savings.
What is a Debenture?
Type of bond, an agreement made between a borrowing company and lender.
What is Revenue Income?
Income recieved by the business on sales of goods & services.
What are sales?
Money made through the sale of goods/services
Either cash or credit
What is Rent Recieved?
When a business rent out a property & makes money.
What is interest recieved?
Money made from savings/investments
What is commission recieved?
When a business/individual sells a product on behalf of another business, getting a percentage of sales in return.
What is discount recieved?
When a business pays reduced price for goods/services.
What is Capital Expenditure?
Assets the business plans to use over a long time.
What are Intangible assets?
Not physical items, difficult to sell
Examples of Intangible assets?
Goodwill
Patent
Trademark
Define goodwill.
Value of busines based on performance.
Define Patent.
Investor has the right to stop people copying their business for a period time.
Define Trademark
Symbol, cannot be used again
What is Revenue Expenditure?
Day to day costs handled in running a business.
Example of Revenue Expenditure
Rent
Inventory
Wages
Insurance
Heating
What is deprication?
Assets loosing their value over time.
What is Straight Line Deprication?
Reduces the value of an asset by the same amount each year.
What is Ruducing Balance Deprication?
Loss of value as being higher during the early years.