Chapter 16: Final accounts

final accounts

the end of year financial accounts produced by a business

creditors

suppliers to a business who have not yet been paid

window dressing

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

profit and loss account

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

liabilities

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

gross profit

sales revenue - cost of sales

profit before interest and taxation

gross profit - overhead expenses

profit after tax

profit made after corporation tax has been deducted

dividends

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

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

cost of sales (or cost of goods sold)

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

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

shareholders’ equity

total value of assets - total value of liabilities

share capital

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

current assets

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

debtors

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

current liabilities

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

shareholders’ equity

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

intangible asset

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

goodwill

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

intellectual property

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

market value

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