balance sheets and profit and loss accounts

Cost of Goods Sold (cost of sales)

Direct costs of producing or purchasing stock that has been sold to customers

Creditors

suppliers who allow a business to purchase goods or services on trade credit

Expenses

indirect fixed costs of production

Final Accounts

published annual financial statements that all limited liability companies are legally obliged to report

Gross profit

sales revenue - direct costs

Profit

Surplus that a business earns after all expenses have been paid for from the firms gross profit

Profit and Loss Account

financial record of a firm's trading activities over the past 12 months, showing all revenues as well as costs and revenues during this time

Retained profit

amount of profit after interest, tax, and divides have been paid and then reinvested into business

Share capital

amount of money raised through the sale of shares

Window dressing

legal act of creative accounting by manipulating financial data to make the results appear more appealing

Balance Sheet

contains financial information about an organization's assets, liabilities, and the capital invested by the owners, showing a snapshot of the firm's financial situation

Book Value

value of an asset as shown on the balance sheet. Market value of assets can be higher than its book value because of intangible assets such as brand value or goodwill

Cost of goods sold

direct costs of producing or purchasing stock that has been sold to customers

Creditors

suppliers who allow a business to purchase goods and services on trade credit

Current asset

cash or liquid asset that is likely to be turned into cash within 12 months of balance sheet date - cash, debtors, stock

Current liabilities

debts that must be settled within one year of the balance sheet date - bank overdrafts, trade creditors, other short-term loans

Depreciation

fall in value of noncurrent assets over time, caused by wear and tear (assets being used) or obsolescence (out-dated)

Expenses

indirect or fixed costs of production

Goodwill

Intangible asset that exists wehn the value of a firm exceeds its book value

Historic cost

purchase cost of a particular fixed assets - used in calculation of depreciation

Intangible assets

noncurrent assets that don't exist in a physical form but are of a monetary value - eg. goodwill, copyrights, brand names and registered trademarks

Net assets

shows value of business to its owners by calculating: all assets - all liabilities. It equals to the total equity

Noncurrent assets

Items owned by a business not intended for sale within the next 12 months. Used repeatedly to generate revenue for the organization - eg. property, plant, and equipment

Noncurrent liabilities

debts owed by a business that are expected to take longer than a year from the balance sheet date to repay

Residual value (scrap value)

estimate of value of noncurrent asset at the end of its useful life

Straight Line Method

means of calculating depreciation that reduces the value of a fixed asset by the same value each year throughout its useful life

Units of production method

method of calculating depreciation allocated an equal amount of depreciation to each unit of output rendered by a noncurrent asset