Business Enterprise Reaston

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  • Created by: MsReaston
  • Created on: 24-01-22 14:32
What to include on a Purchase Order (7 things)
1. The words 'Purchase Order'
2. Buyer's name and address
3. Space for the seller's name and address (filled in)
4. P.O Number
5. Product code, Item number, quantity and price
6. Item description
7. Authorised by
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Items from BUYER to SELLER
1. Purchase order
2. Goods Received Note (GRN)
3. Remittance advice
4. Payment
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Items from SELLER to BUYER
1. Delivery Note with goods
2. Invoice
3. Credit Note
4.Statement of account
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Purchase Order
Buyer sends to seller, lists what they want to buy
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Delivery Note
A note which goes in with the goods from the seller to the buyer
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Goods Received Note (GRN)
Included from the seller to the buyer, completed by the buyer to record the actual amount of goods received
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Invoice
Lists the goods and tells the buyer what is owed
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Credit Note
Sent to the buyer if any refund is due
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Receipt
Given to the buyer when payment is made - showing what they've paid for
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Statement of account
A summary of all the purchases made by the customer in a month. Have 3 columns - debit, credit and balance
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Impacts of getting customers to pay in cash
1) The business needs appropriate safe storage for cash.
2) Cash trade makes the business more attractive to thieves.
3) The business will need a float (supply of change) to give to customers.
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Statement of financial position
A balance sheet
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Fixed assets
Items which the have a life span of more than a year.

Examples: Land, buildings, machinery, fixtures and fittings
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Current assets
Items that are owned for less than a year.

Examples: stock, debtors, bank balances, cash in hand.
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Assests
Things the business own / have of value
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Liabilities
The amount a business owes at any time
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Long term liability
Loans that are repayable in more than one year.

Examples: Building mortgage, bank overdrafts,
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Current liability
Loans that are repayable in less than one year.
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Cost of sales
The cost to the business of producing or buying in the goods that have actually been sold during the financial period of the profit and loss statement
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Gross profit
The profit to the business before expenses are taken away
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Net profit
The money made after the expenses have been taken away
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Drawings
Money taken out
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Sources of revenue
Manufacturing
Service business - such as restaurants
Service business - such as renting out rooms
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Revenue formula
Selling price X Number of items sold
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Gross profit formula
Sales revenue - Cost of sales
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Net profit formula
Gross profit - Expenses
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Statement of Comprehensive Income
A financial statement which shows:
*How much revenue the business has received from sales of goods & services
*How much the business has spent
*Where the money has been spent
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How a loss can be written on a statement
* In red
* In brackets
* With a minus (-) sign
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Cash - Pros
* Instant
* Less chance of fraud
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Cash - Cons
* Not suitable for large amounts of money
* Requires safe storage
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Debit card - Pros
* No need to carry cash
* Transactions are quick
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Debit card - Cons
* It costs money to install as terminal
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Direct debit - Pros
* Can't miss a payment
* Cheap to administrate
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Direct debit - Cons
* Bank needs advanced notification
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Credit card - Pros
* No cash involved
* Can easily be turned into cash
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Credit card - Cons
* Risk of fraud transactions
* Transactions cost slightly more
* Interest can be high
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Business start up costs
Incurred by a business BEFORE they start trading

* Market research
* Premises (buy/rent)
* Machinery
* Fixtures and fittings
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Running costs
Day to day costs a business has to pay.

* Production - cost of manufacturing a product
* Human Resources - cost of employing staff
* Administration - day to day running costs (insurance, rent, stationery etc)
* Sales and Marketing - advertising, custome
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Breakeven
Where a business makes no profit and no loss
Total costs = Total revenue
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Fixed costs
Costs which, regardless of production or how much is produced, stay the same.

Example: If nothing is produced the fixed costs are the same as if 1000 items were produced.
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Variable costs
These are the costs which vary / change. If nothing is made then there is no cost.
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Total Cost formula
Fixed costs + Variable costs
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Total Revenue formula
Selling price X Numbers sold
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Ways a business can cover running costs
* Revenue (main source)
* Interest from money held in bank account
* Rent from property owned by the business rented out to others
* Income from investments such as shares
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Ways a business can reduce costs
Increase the use of IT:
* Word processig - can easily produce professional documents
* Databases - electronic filing system so huge amounts of info can be easily stored and retrieved
* Stock control - keep track of stock in the store
* Email - messages
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Supply & Demand
Sometimes if the price is too high you will have less customers, whereas if the price is lower you will have more customers and therefore more revenue.
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Profit
Happens when the revenues of a business are greater than its total costs.
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Profit formula
Total Revenue - Total Costs
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Ways to increase profit
Businesses can:
* Lower variable costs
* Lower fixed costs
* Increase the sales price
* Increase the quantity of sales
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Impacts of making a loss on a business
If the business makes a loss then they might be:
* Unable to repay loans
* Unable to pay bills such as wages
* Experiencing cash flow problems
* Unable to survive, leading to the business closing down.
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Break Even formula
Fixed Costs
--------------------
Price - Variable Cost per unit
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Fixed Cost examples
* Salaries
* Rent
* Mortgage
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Variable Costs examples
* Electricity
* Materials
* Supplies
* Utilities
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Things to include on a break even chart
* Title
* Axes
* Scale
* Fixed Costs
* Variable Costs
* Total Costs
* Total Revenue
* Break Even Point
* Break Even output
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Margin of Safety
The amount that output can fall from the actual production before a loss is made.
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Martin of Safety formula
Actual production - Break even production
Or
Total output - Break even output
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Break even chart advantages
* quick and simple
* Easy to understand
* Helps spot potential problems
* Can help when applying for a loan
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Break even chart disadvantages
* It's only a forecast
* Assumes that all products are made and sold
* Costs may change
* Not very good services because prices vary greatly
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Long term sources of finance
* Owners capital
* Savings
* Reinvesting profits
* Bank loan
* Silent partner
* Government grants
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Short term sources of finance
* Borrowing from friends
* Bank overdraft
* Trade credit
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Private sector
Internal source of income
* The business' sales
* Put profits back into business
* Trade credit
* Reduce stock levels
* Sell surplus assets
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Private sector
External sources of income
* Owners savings
* Borrowing from family/friends
* Bank overdraft
* Loans
* Sell its debts to another company (factoring)
* Government grants
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Choosing sources of income
* Time and objectives
* Amount needed
* Purpose
* Reputation and creditworthiness
* Economic environment
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Other cards in this set

Card 2

Front

1. Purchase order
2. Goods Received Note (GRN)
3. Remittance advice
4. Payment

Back

Items from BUYER to SELLER

Card 3

Front

1. Delivery Note with goods
2. Invoice
3. Credit Note
4.Statement of account

Back

Preview of the back of card 3

Card 4

Front

Buyer sends to seller, lists what they want to buy

Back

Preview of the back of card 4

Card 5

Front

A note which goes in with the goods from the seller to the buyer

Back

Preview of the back of card 5
View more cards

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