chapter 2 decinitions 1+2 Flashcards
(22 cards)
what is a sole trader
organisations that are owned and operated by one person
what is a partnership
these are organisations owned by two or more persons working in common with a view to make a profit
what is a company
organisations recognised in the law as ‘persons’ in the own right. a company may own assets and incur liabilities in its own name. the accounting of these organisations must meet certain minimum obligations imposed by legislation, for example, via company law and other regulations
what is meant by management accounts
they are usually prepared on a monthly basis to present timely financial and statistical information to business managers. this information helps managers to run the business more effectively, making day-to-day and short term decisions.
what are financial accounts
these are prepared annually, mainly for the benefit of people outside the management of the business, such as the owners of the business (for example, shareholders who appointed directors to run the business on their behalf) HM Revenue and Customs (HMRC), Banks, Customers , suppliers and the government
what is the statement of profit or loss
the summary of business transactions (income and expense) for a given period
what is the statement of financial position
statement of the assets and liabilities of the business and at a given date. this date is the end of the period covered by the statement of profit of loss
what is sales revenue
income generated from the trading activities of the business
what is cost of sales
the cost of buying the goods for resale
what is gross profit
the profit remaining after the cost of sales have been deducted from sales revenue
what is sundry income
other types of income that aren’t generated by the primary trading activities of the business
what are expenses
are day to day running costs of the business
what is net profit or loss
the profit or loss remaining after expenses have been deducted from gross profit and sundry income
what is an asset
an asset is something owned or controlled by a business available for use in the business
what is non current asset
an asset acquired for long term use in the business and not resold as part of the trading activities, for example the purchase of a delivery van
what is a current asset
a short term asset of the business which is to be used in the business in the near future
e.g. cash or something that will soon be converted into cash
what is a revivable
a receivable is an example of a current asset. a receivable is someone who owes the business money
e.g. credit customer
what is a non current liability
an amount owed by the business and due to be repaid after more than 12 months
what is a liability
liability is an amount owed by the business
e.g. obligation to pay money at a future date
what a a payable
a payable is an example of liability. a payable is someone the business owes money to
e.g. credit supplier
what is capital
the amount which the owner has invested in the business. the owed back to the owner and could be regarded as a special liability of the business
what are drawings
drawings are ammounts withdrawn by the business owner for their own personal use: drawings may be of cash or items of inventory
