Business Definitions

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Annual Report
Is used by stakeholders to assess and measure the business' performance for that year. The two main financial documents in the annual report are the balance sheet and the income statement.
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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. 2. Due to reserves-these are made up of retained profit that has not been paid out to shareholders. The accumulated profit is not kept as cash but is invested into assets.
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Share Capital
Money raised form the sale of shares
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Reserves and retained profit
Cumalitive profits kept in the business and some of it used to buy new assets.
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TOTAL EQUITY=
SHARE CAPITAL+RESERVES AND PROFIT
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Income Statement
A formal financial document that summarises a business' trading activities and expenses to show whether the business has made a profit or a loss.
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Other cards in this set

Card 2

Front

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.

Back

The Balance Sheet

Card 3

Front

Items of value owned by a business.

Back

Preview of the back of card 3

Card 4

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 4

Card 5

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 5
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