Business Definitions

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The Balance Sheet
A formal financial document that summarises the net worth of a business at at given point in time by lookking at what the business owns (assets) and what it owes (liabilities and equity). Liabilities must equal assets.
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Assets
Items of value owned by a business.
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Non-current assets
Otherwise known as fixed assets. These are likely to be kept by the business for more than one year eg-vehicles, buildings and machinery.
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Current assets
These are likely to be turned into cash with a year. Examples include- cash and cash equivalents, inventories and receivables.
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Tangible assets
These are assets that have a physical existence eg- machinery and stock
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Intangible assets
These are assets that do not take a physical form eg- patents, brand names, copyrights.
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Liabilities
Money a business owes, ie- debts
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Non-current liabilities
Debts that the business has more than one year to repay. e.g-bank loans and mortgages.
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Current liabilites
Debts that a business may have to repay within one year. eg-overdraft and accounts payable
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Total equity
Total amount of money used by the business obtained from share capital and retained profit
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TOTAL ASSETS=
TOTAL LIABILITIES
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TOTAL ASSETS=
CURRENT ASSETS+ NON-CURRENT ASSETS
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TOTAL LIABILITIES=
TOTAL EQUITY+(CURRENT LIABILITIES+NON-CURRENT LIABILITIES)
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Why does the Balance Sheet balance?
1. Because assets are always equal to liabilities
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Why does the Balance Sheet balance?
1. Because assets are always equal to liabilities
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Other cards in this set

Card 2

Front

Items of value owned by a business.

Back

Assets

Card 3

Front

Otherwise known as fixed assets. These are likely to be kept by the business for more than one year eg-vehicles, buildings and machinery.

Back

Preview of the back of card 3

Card 4

Front

These are likely to be turned into cash with a year. Examples include- cash and cash equivalents, inventories and receivables.

Back

Preview of the back of card 4

Card 5

Front

These are assets that have a physical existence eg- machinery and stock

Back

Preview of the back of card 5
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