Business chapter 17 - final accounts

finance chapter 4

balance sheet

contains financial information about an organisations assets, liabilities and capital invested by the owners

book value

value of an asset as shown on a balance sheet, market value of assets can be higher than book value but is intangible

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

current asset

cash or liquid asset likely to be tuned into cash within 12 months of balance sheet

current liabilities

debts that must be settled within one year of balance sheet

depreciation

fall in value of non current asseys over time caused by wear and tea

expenses

indirect or fixed costs of production as administration charges management salaries insurance premiums etc

final accounts

published annual financial statements that all limited liability companies are legally obliged to report namely the balance sheet and P & L

goodwill

intangible asset which exists when the value of a firm exceeds its book value

gross profit

difference between sales revenue of a business and its direct costs incurred in making or purchasing the products that have been sold to its customers

historic cost

purchase cost of a particular fixed asset

intangible asset

non current assets that do not exist in a physical form but are of monetary value

net assets

value of a business to its owners by calculating the value of all its assets minus its liabilities, this figure must match the equity of the business in the balance sheet

non current assets

items owned by a bsuiness not intended for sale with the next 12 months but used to generate revenue such as property

non current liabilities

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

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 firms trading activities over the past 12 months, showing all revenue and costs

residual value

estimate of value of non-current assset at the end of its useful life

retained profit

amount of profit after interest,tax and dividents have been paid, reinvested back into the business

share capital

amount of money raised through sale of shares were first sold rather than their correct market value

straight line method

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

units of production method

method of calculating depreciation allocates an equal amount of depreciation to each unit of output rendered by a non-current asset

window dressing

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