Key Terminology Flashcards
Non current assets
Resources owned by the business that it intends to keep for more than one year. They are used to generate profits and are not intended for resale until the end of their useful life. They can include land, buildings, premises, machinery, equipment, vehicles, furniture, fixtures and fittings.
Current assets
Resources that are owned by a business and are already cash or are intended to be cash within the next 12 months. They include inventory, trade receivables, prepayments, cash in the bank and cash in hand.
Inventory
Goods that are intended for resale but have not yet been sold.
Trade receivables
Customers that owe money to the business because they have bought goods on credit.
Capital
Balance at start of the year + Capital Introduced + Profit for the Year – Drawings
Capital introduced
Any money or goods provided by the owner for the business
Drawings
Money or goods taken out of the business by the owner
Non current liabilities
Amounts owed by a business that will be fully repaid after more than one year. They include bank loans, mortgages and debentures
Current liabilities
Amounts owed by the business that must be repaid within one year. They include trade payables, accruals and bank overdraft
Trade payables
Suppliers that are owed money by a business because they have sold goods to the business on credit
Prepayment
An expense that has been paid in advance and relates to the next accounting period
Accrual
An expense for services that have been used but not yet invoiced to the business at the end of the accounting period
Irrecoverable debt
A business will not receive the amount owed by a customer who has been sold goods on credit. This may be because the customer has been declared bankrupt
Depreciation
Spreading the cost of a non-current asset over its useful life. It is the decrease in value of non-current assets over a period of time
