Final Accounts - Important Points

Vocabulary flashcards related to final accounts and financial statements.

Costs of Sales (COS)

The direct costs of production, such as the cost of raw materials, component parts, and direct labor.

Dividends

The payments from a company’s profit (after interest and tax) are paid to the shareholders (owners) of the company.

Expenses

A firm’s indirect costs of production, e.g., rent, salaries, marketing, accountancy fees, bank interest charges, utility bills, repairs and maintenance, and general insurance.

Gross Profit

The profit from a firm’s everyday trading activities.

Profit and Loss Account

Shows an organization’s profit (or loss) after all costs have been subtracted from the organization’s revenues, each year.

Profit Before Interest and Tax

Shows the value of a firm’s profit (or loss) before deducting interest payments on loans and taxes on corporate profits.

Profit for Period

Shows the actual value of profit earned by the business after all costs have been accounted for, i.e., profit after interest and tax.

Sales Revenue

The money an organization earns from selling goods and services.

Retained Profit

The funds remaining from a firm’s profit (after interest and tax) that is not paid to shareholders but kept within the business for its internal use.

Tax

The compulsory deductions paid to the government as a proportion of a firm’s profits.

Non-current assets

These are any assets used for business operations and are likely to be used for more than 12 months.

Current assets

These are assets that are likely to be converted into cash within 12 months or less.

Current Liabilities

These are debts that must be settled within one year.

Non-current Liabilities

These are debts that are due to be repaid after 12 months.

Equity

This shows the value of the business belonging to the owners.

Overdraft

A short-term source of external finance that enables a business to withdraw more money from its bank account than the amount that exists.

Share Capital

Finance raised by a limited liability company from selling shares to individual and institutional shareholders.

Stock Exchange

The marketplace where stocks and shares of public limited companies (PLCs) can be bought and sold.