5.3, 5.4, 5.5, 4.1, 4.2

capital

Start up (finance needed by new businesses to pay for non- current and current assets before it can begin trading)

Income statement

: shows if the business is making a PROFIT or LOSS.

Statement

of financial position: a financial account which shows what the business is worth at any given period of time.

Cash

: the actual money the business has in its bank account.

Gross profit

= revenue-cost of sales.

Reward

for risk taking- profits entrepreneurs for taking risks and allowing payments to be made.

Revenue expenditure

(money spent on day- to- day expenses* do not involve the purchases of long- term assets)

Capital expenditure

(money spent on non- current assets which will last for more than a year)

Source of finance

- profits after payments to owners are a very important source of finance for businesses.

Indicator of success

- if some businesses are profitable, profit can be an indicator for other businesses as to whether producing similar goods or services would be profitable.

Profit

can be increased by increasing total revenue or decreasing total costs.

Capital

: money invested into the business by the owners.

Accounts

the financial records of a firms transactions

Income statements

a financial statement that records the income of a business and all costs incurred

Profit = Total revenue

Total costs

Cash

the actual money the business has in its bank account

Trading account

shows the information at the top of a cashflow forecast (revenue and cost of sales), and how to calculate gross profit

Revenue/sales/sales revenue/total revenue

the amount earned from the sales of products

Cost of sales

the cost of purchasing the goods used to make the products sold

Cost of sales = cost per unit x number of sales Gross profit

the difference between revenue and cost of sales

Gross profit = revenue

cost of sales

Expenses

the day-to-day costs of running a business

Net profit

the actual profit after expenses (not including gross profit) have been paid

Net profit = gross profit

expenses/overheads

Reward for enterprise

entrepreneurs may have important qualities and characteristics and profit rewards them for this)

Reward for risk taking

profits rewards entrepreneurs for taking risks and allowing payments to be made

Source of finance

profits after payments to owners are a very important source of finance for businesses

Indicator of success

if some businesses are profitable, profit can be an indicator for other businesses as to whether producing similar goods or services would be profitable

Statement of financial position

a financial account which shows what the business is worth at any given period of time

Business assets

something owned by the business

Liabilities

something owed by the business

Capital

money invested into the business by the owners

Income statement

shows if the business is making a PROFIT or LOSS

Assets

Inventories, Van/truck, Debtors, Cash

Liabilities

Overdrafts, Mortgages, Trade creditors

capital

Start up (finance needed by new businesses to pay for non- current and current assets before it can begin trading)

Accounts

: the financial records of a firms transactions.

Profit

can be increased by increasing total revenue or decreasing total costs.

Accounts

the financial records of a firms transactions

Income statements

a financial statement that records the income of a business and all costs incurred