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UNIT 3

BTEC Business Finance

TermDefinition
Financial transaction Actions by a business that involve money going into or out of a business e.g. paying a bill.
HMRC Her Majesty's Revenue & Custom is government department responsible for the collection of taxes.
Profit Surplus achieved when total revenue from sales is higher than the total costs of a business.
Loss Shortfall suffered when total revenue from sales is lower than the total costs of a business.
Gross profit Is sales revenue minus the costs of goods sold.
Net profit Is gross profit minus other expenses.
Revenue Quantity sold multiplied by the selling price per unit.
Trade receivables This is money owed to the business from sales made on credit (debtors).
Trade payables This is money the business owes from purchases bought on credit (creditors).
Capital income Money invested by the owners or other investors that is used to set up or expand the business,
Non current assets Assets owned by the business that have value and will last for more that one year. Also known as fixed assets.
Assets Any item of value owned by the firm.
Loan A source of capital income, it is an amount of money lent to the business from bank/financial institution for the short-medium term.
Interest repayment Paid back with loan repayments as this is the cost of borrowing the money.
Shares When you invest in a company you get part-ownership in the business.
Shareholders Owners of a business that contribute towards capital income.
Dividends The reward shareholders receive from investing in the company.
Sole trader A person who sets up and owns their own business.
Debentures A medium-long term source of capital income, it is repaid in a lump sum and is secured against an asset.
Revenue income Money that comes into the business from its day to day activities e.g. sales.
Cash sales The customer pays there and then, sales are immediate.
Credit sales The customer buys but then pays at a later date.
Commission A fee received based on a percentage of sales made.
Capital expenditure This is money spent by the business to buy capital items/non current assets.
Intangible asset Owned by the business and adds value but it cannot be touched e.g. trademark.
Statement of financial position A document that shows the assets and liabilities and the net worth of the business (balance sheet).
Revenue expenditure This is money spent on a day-to-day or regular basis by the business.
Inventory This is raw materials purchased, finished goods to be sold - it is also known as stock.
Rates These are paid to the local council for services and are based on the size and location of the business.
Salary Annual figure paid to an employee divided into equal amounts.
Wage An hourly rate paid to an employee based on the work they do.
Depreciation An accounting technique used to spread the cost of an asset over its useful life.
Straight line method depreciation Asset is depreciated by a set amount each year.
Reducing balance depreciation Asset is depreciated by a set percentage each year based on reducing balance.
Internal sources of finance Money available to fund expenditure from within business.
Created by: mslynam