Unit 3.4 Glossary of Key Terms - Final Accounts

A comprehensive glossary of important financial terms related to final accounts.

Accumulated depreciation

The accrued value of non-current assets, which fall in value over time due to depreciation.

Assets

Possessions owned by a business that have monetary value, such as buildings, land, machinery, equipment, inventories, and cash.

Balance sheet

Also known as the statement of financial position, it shows the value of a firm's assets, liabilities, and owners' investment at a specific time.

Cash

The money an organization has 'in hand' or 'at bank', the most liquid type of current assets.

Copyrights

Intangible assets that give the registered owner legal rights to creative works.

Costs of sales (COS)

The direct costs associated with production, including raw materials, component parts, and direct labor.

Creditors

Suppliers that allow a business to purchase goods and/or services on trade credit.

Current assets

Short-term assets belonging to an organization which last for up to 12 months, like cash, debtors, and stock.

Current liabilities

Short-term debts of a business that must be repaid within twelve months.

Debtors

Customers that owe money to the organization for goods or services bought on trade credit.

Depreciation

Fall in the value of a fixed asset over time, mainly due to wear and tear.

Dividends

Payments made from a company’s profit to its shareholders.

Equity

The value of the owners' stake in the business at the time of reporting the balance sheet.

Expenses

Indirect costs of production such as rent, salaries, and marketing.

Final accounts

Published accounts of an organization used by various stakeholders.

Finished goods

Final products of a business ready for sale to customers.

Fixed assets

Long-term assets used repeatedly by an organization, not intended for resale within twelve months.

Goodwill

The reputation and established networks of an organization that enhance its monetary value.

Gross profit

Profit from everyday trading activities, calculated as sales revenue minus cost of sales.

Illiquid assets

Items of value that cannot be quickly sold without significant loss.

Intangible assets

Non-physical fixed assets valuable to a firm’s survival and success.

Intellectual property rights (IPRs)

A firm's intangible assets with monetary value, including goodwill and patents.

Liabilities

Debts of a business owed to others.

Net assets

Overall value of an organization’s assets after all liabilities are deducted.

Non-current assets

Long-term assets not intended for immediate resale.

Non-current liability

Debt owed that will take longer than a year to repay.

Overdrafts

Financial service allowing customers to withdraw more money than available in their account.

Patents

Official rights given to a business to exploit an invention for commercial purposes.

Profit and loss account (P&L)

Shows a firm’s profit after all production costs have been subtracted.

Profit after interest and tax

Actual profit value earned by the business after all costs are considered.

Profit before interest and tax

Profit value before deducting interest and taxes.

Raw materials

Natural resources used in the production process.

Residual value

Value of a fixed asset at the end of its useful life.

Retained profit

Earnings after all costs are paid and dividends are compensated.

Sales revenue

Money earned from selling goods and services.

Share capital

Value of equity funded by shareholders through an IPO or share issue.

Short-term loans

Advances from a financial lender that need to be repaid within 12 months.

Stocks

Goods available for sale.

Straight line depreciation

Method of depreciation where an asset's value decreases evenly over its useful life.

Tax

Compulsory deductions paid to the government based on a firm’s profits.

Total assets

Sum of a firm’s non-current assets and current assets.

Total liabilities

Sum of current liabilities and non-current liabilities.

Trade creditors

Suppliers that offer trade credit that needs repayment later.

Trademarks

Registered symbols or names representing a company or product.

Units of production method

Depreciation method based on usage of a non-current asset.

Window dressing

Legal manipulation of financial statements to improve figures.

Work-in-progress

Parts and components used in the production process.

Working capital

Money available for day-to-day operations of a business.