Business, Bookkeeping, Law, and the External Environment Notes

Entity Concept

The accounting principle that the business is separate from the owner, meaning business money is not equal to owner's money and accounts are kept for the business only.

Sole Trader

A business structure with $1$ owner who keeps all the profit, has unlimited liability, is unincorporated, and pays income tax; if the business fails, the owner loses personal money and assets.

Partnership

A business owned by $2$ or more owners who have unlimited liability, share profits (which do not have to be equal), pay income tax, and operate as an unincorporated entity.

Limited Company (LTD)

An incorporated business that is a separate legal entity from its owners (shareholders), offering limited liability and paying corporation tax.

Unlimited Liability

A legal condition where the business owner is fully responsible for business debts, meaning the owner's personal belongings may need to be sold if the business cannot pay its debts.

Limited Liability

A legal condition where the owner only loses the money they invested in the business, ensuring personal belongings are protected.

Incorporated

A legal status where a business is legally separate from its owner.

Unincorporated

A legal status where the business and the owner are legally the same.

Finance Function

The department responsible for managing money and financial information across the organization.

External Auditors

Independent professionals who check financial statements and accounts to confirm that they are true and fair.

Internal Auditors

Auditors who check internal controls and improve processes within an organisation, but are not responsible for signing accounts.

Solvency

The ability of a business to pay debts when due.

Efficiency

Doing work using the least time, money, or waste.

Corporate Social Responsibility (CSR)

The principle that a business takes responsibility for its impact on society and the environment by acting ethically and responsibly rather than focusing solely on profit.

Sustainability

Running a business without damaging the ability of future generations to meet their needs through long-term thinking and eco-friendly activities.

Stakeholders

People or groups affected by the business