finance and accounts busman ibdp

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capital expenditure

money spent on fixed assets, which are long-term assets used for more than 12 months, such as machinery, land, infrastructure.

revenue expenditure

money spent on day-to-day business operations called operation expenses, which are short-term and are, in some cases, “used” for less than 12 months, such as rent, wages, raw materials

internal sources of income

sources of income obtained from within the business, such as personal funds, retained profit and sales of assets

personal funds

personal savings or money, or money provided by friends or family, which are invested into the business

retained profit

profits which remain after all costs and dividends are paid from the businesses revenue

sale of assets

a business choosing to sell off its unwanted/unused assets, such as obsolete machinery and redundant infrastructure

external sources of income

money which is obtained from sources outside of the business, such as share capital and loan capital

share capital

money raised from share sales on the stock exchange - privately held companies cannot sell shares)

loan capital

money sources from lending institutions such as banks

overdraft

when lending institutions alloow businesses to take out more money than available to them

trade credit

an agreement between businesses to let the buyer receive the goods, but then pay them at a later date

crowdfunding

raising finance through many individuals, which choose to donate a small sum, amounting to a large sum of income

leasing

renting assets to another businesses, letting the firm use the asset without purchasing it

microfinance providers

a financial service which is aimed at low income/disadvantaged sectors of society

business angels

wealthy individuals which choose to invest their money into a business

cost

expenditure paid to produce and sell goods

revenue

income from all sales made - units sold x price

profit

the positive difference between revenue and costs - revenue - costs - if there is a positive difference, there is a sign of profit, a negative difference is a sign of loss

fixed costs

costs which do not change in proportion to the output of goods, and are paid regardless of the business activity. these are costs such as wages and rent.

variable costs

costs which do change in proportion to the output of goods, varying based on how much is produced. these are costs such as raw materials and utility fees.

direct costs

costs which specifically relate to a product/project, such as materials or consultancy

indirect costs

cannot be specifically related or attributed to any particular product, such as rent insurance or advertising

final accounts

financial statements which are prepared regularly by the end of a financial year or certain period of time

income statement/profit and loss statement

consisting of the trade accounts, profit & loss account and appropriation account, the income statement shows the income and expenditure flow or a business over a given period of time - in non profits profit is replaced with surplus

balance sheet/statement of financial position

consisting of three parts, assets liabilities and equities, it is a financial account listing all assets, liabilities and capital of a business at a certain point in time

assets

resources of value which a business owns or is owed

non-current asset

long-term assets which are in a business for more than 12 months, such as machinery or buildings

current-assets

short-term assets which last up to a maximum of 12 months, such as cash, debtors and stock

liabilities

a firms legal debts and what is owes to any institution or individual

non-current liabilities

long-term debts/borrowings which are payable over the course of 12 or more months, such as mortgages and long-term bank loans

current liabilities

short term debts which are payable within 12 months, such as creditors, overdrafts or taxes

equity

the value of all assets if they were liquidated

share capital

the capital invested in a business through shares

retained earnings

all retained profits or surpluses

intangible assets

assets which are not physical in nature, such as patents, copyrights and trademarks.

cash flow

the movement of money in and our of a business during a specific peiod of time - cash inflow - cash outflow

cash flow forecast

a financial account which shows the predicted movement of cash in and cash out of a businesses over a period of time, which is based off a cash flow statement

cash flow statement

a document of data stating the inflow and outflow of cash of a business over a period of time

investment

the act or state of investing, which is spending money on purhcasing an asset with a expectation of future earnings