Finance and Accounts

Question 1

Capital Expenditure

Answer 1

Finance spent on fixed assets.

Question 2

Revenue Expenditure

Answer 2

Finance spent on the business’ daily running.

Question 3

Personal Funds

Answer 3

Used mainly for sole traders and partnerships. It is used for both capital and revenue expenditure.

Question 4

Retained Profit

Answer 4

What’s left after a company pays direct and indirect costs, income tax and dividend to shareholders. It is used for both capital and revenue expenditure.

Question 5

Sale of Assets

Answer 5

When a bank or firm sells receivables to another party.

Question 6

Overdraft

Answer 6

A negative balance in a person’s bank account.

Question 7

Trade Payables

Answer 7

The money a business owes for goods and services while purchasing on credit.

Question 8

Bank Loan

Answer 8

Money loaned at interest from a bank to a borrower for a certain period of time.

Question 9

Leasing

Answer 9

A contract outlining the terms in which one party agrees to rent the asset owned by another party.

Question 10

Debentures

Answer 10

An unsecured loan certificate issued by a company. It is back by general credit instead of specific assets.

Question 11

Crowdfunding

Answer 11

Small amounts of capital donated by a large number of individuals in order to fund something.

Question 12

Share Capital

Answer 12

The money company owners have invested into a business, represented by common/preferred shares.

Question 13

Mortgage

Answer 13

A type of loan used to purchase or maintain a home, or other real estate.

Question 14

Government Grants

Answer 14

A financial award given by a federal, state or government for a beneficial project.

Question 15

Hire Purchase

Answer 15

An agreement where the buyer makes downpayment and pays the balance plus interest in its installments.

Question 16

Business Angels

Answer 16

High net-worth individuals who divest part of their assets into new and growing private businesses.

Question 17

Microfinance

Answer 17

A banking service provided to low-income groups without access to other financial services.

Question 18

Owner’s Funds

Answer 18

Funds provided by the owners of an enterprise.

Question 19

Fixed Costs

Answer 19

Production costs a business must pay regardless of how much they produce and sell.

Question 20

Variable Costs

Answer 20

Production costs that change with output level. If output level is zero, so are the costs.

Question 21

Total Costs

Answer 21

What you get when adding total fixed and variable costs.

Question 22

Direct Costs

Answer 22

Specifically relate to an individual project or the output of a particular product. Typically also amounts as variable costs.

Question 23

Indirect (Overheard) Costs

Answer 23

Cannot clearly be traced to production or sale of any single product. Can count as fixed costs to an extent.

Question 24

Sales Revenue

Answer 24

Price x Quantity; The money earned from selling goods and services.

Question 25

Revenue Streams

Answer 25

Money from other than sales revenue.

Question 26

Final Accounts

Answer 26

Made up of the Statement of Profit and Loss and the Statement of Financial Position.

Question 27

Internal (Final Accounts)

Answer 27

Typically used to make decisions about the organization's operations.

Question 28

External (Final Accounts)

Answer 28

Typically used by to evaluate the organization's financial health.

Question 29

Cost of Sales

Answer 29

These are costs that a business can easily connect to the good or service it has produced. Also known as direct costs.

Question 30

Expenses

Answer 30

Costs that affect the business, not just the goods and services. Also known as indirect costs.

Question 31

Profit

Answer 31

What a profit-making business earns after all expenses have been paid for from gross profit.

Question 32

Surplus

Answer 32

What a non-profit business earns after all expenses have been paid for from the firm’s gross surplus.

Question 33

Retained Surplus

Answer 33

What non-profit entities reinvest back into the business for its own use.

Question 34

The Statement of Financial position (balance sheet)

Answer 34

Snapshot of a firm's value at a point in time.

Question 35

Assets

Answer 35

These are items of monetary value that are owned by a business.

Question 36

Non-Current Assets

Answer 36

These are any assets used for business operations and are likely to be used for more than 12 months.

Question 37

Current Assets

Answer 37

These are assets that are likely to be converted into cash within 12 months or less; The three main types of current assets are: Cash, Debtors and Stock.

Question 38

Liabilities

Answer 38

The legal obligations of a business to repay its lenders or suppliers at a later date.

Question 39

Current Liabilities

Answer 39

Debts that must be settled within one year.

Question 40

Non-Current Liabilities

Answer 40

Debts that are due to be repaid after 12 months.

Question 41

Equity

Answer 41

Shows the value of the business belonging to the owners.

Question 42

Intangible Assets

Answer 42

Non-physical fixed assets that can earn revenue for a business.

Question 43

Brands

Answer 43

Legally registered names to be used in the trading activities of a business.

Question 44

Patents

Answer 44

Legal protections for product designs created by the inventor.

Question 45

Copyrights

Answer 45

Legal protection for IP.

Question 46

Goodwill

Answer 46

The established reputation of a business.

Question 47

Registered Trademarks

Answer 47

Legal protection for logos used by businesses.

Question 48

Net Book Value

Answer 48

The historical cost of an asset less accumulated depreciation.

Question 49

Straight Line Depreciation

Answer 49

Purchase cost – Residual value Lifespan

Question 50

Unit of Product Depreciation

Answer 50

Purchase cost – Residual value Expected no. of units over lifetime