Small Business Finance and Accounting

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Vocabulary flashcards for small business finance and accounting concepts.

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32 Terms

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Debt Finance

Funding obtained through loans, overdrafts, or lines of credit.

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Trade Credit

Supplier credit arrangements allowing businesses to buy now and pay later.

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Government Grants and Subsidies

Financial aid available for small businesses, especially for innovation or employing apprentices.

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Leasing and Hire Purchase

Financing options for equipment or vehicles, preserving working capital.

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Invoice Financing

Selling unpaid invoices to a third party to access cash quickly.

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Crowdfunding (Debt-based)

Raising money via online platforms in exchange for repayment with interest.

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Microfinance

Small loans typically from community or not-for-profit lenders.

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Collateral

Assets pledged as security for a loan.

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Liquidity

The ability of a business to meet its short-term obligations.

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Guarantors

Individuals who promise to repay a loan if the borrower defaults.

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Sole Trader

A business owned and controlled by one person who is fully liable for its debts.

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Partnership

A business owned and controlled by two or more people who share in its profits or losses.

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Proprietary Company (Pty Ltd)

A separate legal entity owned by shareholders, offering limited liability.

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Manufacturing

A type of business that produces goods from raw materials, is capital-intensive, and requires machinery, labor, and production space.

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Trading/Retailing

A type of business that buys and resells products, focuses on inventory management and sales, and includes wholesalers and retailers.

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Service Providing

A type of business that offers intangible products, is labor-intensive, and for which customer experience is crucial.

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Accounting Equation

Assets = Liabilities + Owner’s Equity; the foundation of financial accounting.

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Double Entry Accounting

Each transaction affects at least two accounts, ensuring the accounting equation remains balanced.

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Perpetual Inventory System

An inventory system where records are updated continuously, and COGS is recorded at the time of sale.

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GST (Goods and Services Tax)

A 10% value-added tax on most goods and services sold or consumed in Australia.

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Accrual Basis

Revenues and expenses recorded when earned/incurred, not when cash is exchanged.

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Going Concern

Assumes the business will continue to operate in the foreseeable future.

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Accounting Entity

The principle that a business is separate from its owner.

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Monetary Unit Assumption

All transactions are measured and reported in monetary terms (e.g., AUD).

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Historical Cost

Assets are recorded at their original cost.

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Materiality

Only information that would influence decisions is included in financial reports.

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Accounting Period

The life of a business is divided into regular periods (e.g., monthly, yearly) for reporting.

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Bad Debts

The risk of non-payment by customers, impacting cash flow and profits.

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Balance Sheet

A financial statement showing the financial position of a business at a specific point in time; it provides figures necessary to calculate the liquidity of the business.

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Income Statement

A financial statement showing the performance of a business (profit or loss) over a period of time.

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Net sales

= sales – sales returns – discount allowed

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Total cost of sales =

cost of sales + import duties + cartage/freight inwards – discount received