AQA ACCN3 Definitions

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ACC3 Definitions
Retained Profits This is when profits are generated by the business through normal trading
activities, are used to help finance the business.
Capital Invested by the Owner(s) This is when the owner or owners of the business put their own money into the
Bank Overdraft This is a short term form of borrowing from the business to use more money in
their bank account then they actually have. There is usually an agreed limit to how
much the business can go overdrawn by.
Bank Loans This is a medium or long form of borrowing. They are usually taken out to buy
assets. The loans repayment amount and repayment dates are usually fixed and the
total amount borrowed is usually paid over months or years.
Mortgages This Is a long term form of borrowing. It is used to finance the purchase of a
building. The interest, amount to be paid and the date to be paid every month is
fixed and the overall amount is paid over several years.
Debentures These are a type of stocks that can be sold and bought on the stock market.
Debentures are long term loans given to companies by other companies. The
holders of debentures will receive interest payments, usually annually on the
amount loaned. At the end of the agreed period the lenders will receive the
capital sum.
Shares Shares are sold and bought on the stock exchange. People buy shares of a company
in return for an annual payment based on a fixed percentage of the share. The
payment is known as a dividend. The money can be used as capital with a business.
Directors Are responsible for preparing the companies accounts
Auditors Are then appointed (by the shareholders) to check and give an opinion on these
accounts and reports.
IAS 1 Presentation of the Financial Statements What it is: This standard sets out how financial statements should be presented.
Purpose: This ensures that financial statements can be compared with accounting
statements of previous years with other companies' financial statements.
IAS 2 Inventories What It is: This standard applies to all types of stock. It states that stock should be
valued at the lower of cost or net realisable value.
Purpose: To ensure that stock is valued correctly and precisely.

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IAS 7 Statements of Cash Flows What it is: This standard requires that a cash flow statement must be included as
part of the company's published accounts.
Purpose: To ensure that cash flow statements are produced to a high standard with
the standardized layout.
IAS 8 Accounting Policies What it is: If you are aware of an error the accounts have to be altered and
rectified in the next set of accounts issued and must be correct in the next set of
accounts.…read more

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Coningent Liabilities Is a possible obligation for which the amount is uncertain?
Contingent assets Are possible assets that arise from past events?…read more


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