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29 terms

Accounting

Units 44, 47, 48, 49
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accounting
the process of identifying, measuring and communicating information to permit informed judgments and decisions by users of the information
assets
resources used or owned by the business in production
balance sheet
a summary at a point in time of business assets, liabilities and capital
capital
a source of funds provided by the owners of the business used to buy assets
current assets
assets likely to be changed into cash within a year
current liabilities
debts that have to be repaid within a year
drawings
money withdrawn by a sole trader from the business for personal use
fixed assets
assets with a lifespan of more than one year
liabilities
the debts of the business which provide a source of funds
long-term liabilities
debts that are payable after 12 months
net assets
the value of total assets minus current liabilities minus long-term liabilities; equal to capital and reserves on the balance sheet
net current assets
current assets minus current liabilities; aka working capital
non-current assets
the long-term assets of a plc which are not expected to be sold within a year
non-current liabilities
the long-term liabilities of a plc - any amount of money owed for more than a year
working capital
the funds left over to meet day-to-day expenses after current debts have been paid; current assets minus current liabilities
working capital cycle
the flow of liquid resources into and out of a business
operating profit
the profit made by a business as a result of its ordinary trading activities
income statement
a financial document showing a company's revenue/income and costs/expenditure over a particular time period, usually one year; aka profit and loss account
profit and loss account
shows net profit after tax by subtracting business expenses and taxation from operating profit
profit and loss appropriation account
shows how the profit after tax is distributed between shareholders and the business
profit quality
occurs when profits are sustained over a period of time; there is low profit quality if profit in one time period is mainly due to some one-off factor which is not sustainable
profit utilization
the way in which profit made by a business is distributed
trading account
shows operating profit by subtracting the cost of sales from turnover
gross profit
total sales revenue or turnover minus cost of sales, the direct costs of production
gross profit margin
gross profit expressed as a percentrage of turnover
net profit
profit on ordinary activities before taxation; total sales revenue or turnover minus cost of sales and overheads
net profit margin
net profit expressed as a percentage of turnover
profit margin
profit expressed as a percentage of turnover
return on capital
the amount of profit expressed as a percentage of the capital invested in a business