Chapter 16: Final accounts

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22 Terms

1

final accounts

the end of year financial accounts produced by a business

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2

creditors

suppliers to a business who have not yet been paid

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3

window dressing

presenting the accounts of a business in the best possible, or most flattering, way which could potentially mislead users of accounts

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4

profit and loss account

records the revenue, costs and profit (or loss) of a business over a given period of time

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5

liabilities

financial obligations of a business that it is required to pay in the future

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6

gross profit

sales revenue - cost of sales

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7

profit before interest and taxation

gross profit - overhead expenses

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8

profit after tax

profit made after corporation tax has been deducted

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9

dividends

the share of the profits paid to shareholders as a return for investing in the company

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10

retained profit

the profit left after all deductions, including dividends, have been made; this is “ploughed back” into the company as a source of finance

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11

cost of sales (or cost of goods sold)

this is the direct cost of purchasing the goods that were sold during the financial year

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12

balance sheet (statement of financial position)

an accounting statement that records the values of a business’s assets, liabilties and shareholders’ equity at one point in time

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13

shareholders’ equity

total value of assets - total value of liabilities

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14

share capital

the total value of capital raised from shareholders by the issue of shares

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15

current assets

the value of all assets that could reasonably be expected to be converted into cash within one year

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16

debtors

customers who have bought products on credit and will pay cash at an agreed date in the future

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17

current liabilities

debts of the business that will usually have to be paid within one year

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18

shareholders’ equity

total value of capital invested in the business by shareholders either in the form of share capital or retained profits

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19

intangible asset

an identifiable non-monetary (not involving money) asset without physical substance

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20

goodwill

arises when a business is valued at or sold for more than the balance sheet value of its assets

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21

intellectual property

an intangible asset that has been developed from human ideas and knowledge

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22

market value

the estimated total value of a company if it were taken over

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