AAT Level 2 - The Business Environment

AAT Code of Professional Ethics

Integrity, Objectivity, Professional Competence and Due Care, Confidentiality and Professional Behaviour

Acceptance

An unqualified agreement to the terms of an offer

Breach of Contract

The failure to perform any term of a contract

Business Functions

Distribution and Logistics, Finance, Human Resources, IT, Operations and Sales and Marketing

Capacity

The legal ability of a person to enter into a contract

Civil Law

Area of law that deals with disputes between private individuals or businesses. It aims to compensate the injured party

Common Law (Judicial Precedent / Case Law / Judge-made Law)

Law based on the decision of judges in pervious cases

Company

An incorporated business that has shareholders who have limited liability for the debts of the business

Private Limited Companies (Ltd)

Shareholders have to be invited to purchase shares in the company

Public Limited Companies (Plc)

Shares may be advertised for sale to the public

Consideration

Something of value exchanged between parties

Consumer Spending

The amount of money spend on goods and services by individuals and households

Contract Law

Area of law that regulates legally binding agreements between two or more people or businesses

Corporate Social Responsibility (CSR)

Responsibility of an organisation for the impacts of its decisions on society and the environment above and beyond its legal obligations, through transparent and ethical behaviour

Corporation Tax

UK tax imposed on the profits of a company

Courts

Institutions that administer justice by interpreting and applying the law in legal cases

Criminal Law

Area of law that deals with criminal offences. Aims to punish the offending party

Cyber Security

Measures taken to protect a computer or computer system against unauthorised access or attack

Damages

Monetary compensation awarded to a party for loss or injury resulting from a breach of contract

Data Collection

The process of gathering information for analysis

Data Dissemination

The distribution and communication of information to relevant stakeholders

Data Processing

The manipulation and organisation of data to produce meaningful information

Data Security

The protection of data from unauthorised access, corruption of theft

Demand

The volume of a product or service that customers are prepared to buy at a specific price

Discharge of Contract

Termination of contractual obligations, which can occur through performance of the obligations or from a breach of contract

Efficient Working Practices

Methods of working that maximise productivity and minimise waste

Entity Concept

Accounting principle that a business is separate from its owners, and therefore need to keep separate records

Equitable Remedies

Non-monetary remedies provided by courts, such as specific performance, injunction or rescission

Equity

Fairness. Area of law that provides alternative remedies where financial compensation is not appropriate

Exchange Rate

Value of one currency in terms of another currency

Income Tax

UK tax charges on most types of income earned by individuals

Interest Rates

The amount of interest payable, expressed as a percentage of the amount borrowed

Intranet

A private network accessible only to an organisation’s staff that is used for sharing information and computing resources

Invalid Sources of Information

Unreliable or untrustworthy sources that may provide inaccurate or misleading information

Invitation to treat

Indication that a person is willing to negotiate a contract but is not yet prepared to make a biding offer. Inviting another person to make an offer

Legality of a contract

The legal status of a contract. A contract may be Valid, Void or Voidable

Limited Liability

A legal structure where the owners of a business are not personally liable for the debts of the business beyond the amount they have invested

Limited Liability Partnership (LLP)

An incorporated business that has at least two members who have limited liability for the debts of the business

Micro-economics

Study of individual consumers, businesses and the economic issues they face

Not-for-profit Organisation

Organisation that operates for purposes other than making a profit, often for social, educational or charitable activities

Off the Shelf Companies

Pre-registered companies that are ready to trade immediately upon purchase

Offer

An expression of willingness to contract on specific terms, made with the intention that it will become binding once accepted

Outsourcing

Paying a third party to complete a business process or function

Parliament

Supreme legislative body in the UK, consisting of the monarch, the House of Lords and the House of Commons

Parties of a contract

Individuals or organisations that enter into a contract

Partnership

An unincorporated business that is owned by two or more people

Pay As You Earn (PAYE)

UK system where employers deduct income tax from employees’ wages and pay it directly to the government

Pre-incorporation contracts

Agreements entered into by promoters on behalf of a company that is yet to be formed. A promoter is a person who applies for the incorporation of a company

Primary Sources of Information

Sources that provide first-hand evidence about a topic e.g. research findings from surveys, interviews and experiments

Principles of an effective tax system

• Certainty

• Convenience

• Economy

• Equity

• Fairness

• Transparency

Private Law

Area of law that governs relationships between individuals and private entities

Public Interest Duty

An accountants obligation to act in the best interests of the public

Public Law

Area of law governing the relationship between individuals and the state

Qualities of Useful Information

• Comparability

• Consistency

• Relevance

• Reliable

• Timeliness

• Understandability

Risk

The possibility that an outcome is different to what you were expecting to happen, where the probabilities of the possible outcomes are known

Secondary Sources of Information

Sources that interpret, analyse or summarise primary sources of information

Sole Trader

An unincorporated business that is owned and run by one person

Solvency

The ability of a business to pay bills as they need to be paid and to make sure that there is enough money for the business to run over a period of time

Stakeholders

Individuals or groups that have an interest in the decisions and activities of an organisation

Internal Stakeholders

Exist within an organisation e.g. employees and owners

External Stakeholders

Exist outside an organisation e.g. customers, suppliers, finance providers, government, regulatory bodies, the general public

Supply

The volume of a product or service that a business is prepared to sell at a specific price

Sustainability

Taking a long-term view and allowing the needs of present generation to be met without compromising the ability of future generations to meet their own needs

Termination of Offer

The end of an offer’s validity, which can occur through revocation, rejection or lapse of time. Once an offer has been terminated it can no longer be accepted

Tribunals

Alternative to the courts system, designed to be more informal and accessible than traditional courts

Triple Bottom Line Reporting

A framework for businesses that includes social, environmental and financial performance

Uncertainty

The inability to predict the outcome of an action, where the randomness of outcomes cannot be expressed in terms of specific probabilities

Valid Sources of Information

Reliable and credible sources that provide accurate and trustworthy information

Vaue Added Tax (VAT)

UK tax which is added to the selling prices of goods and services sold by registered businesses