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BTEC Business Finance

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