P1
The main purpose of accounting for an organisation is to keep records of the financial
transactions of business. Financial transactions relates to money being received by the
business e.g. sales and loans, and money spent by the company e.g. purchase of equipment,
staff wages etc. From this, accountants can help a businesses find out how healthy they are by
showing them whether they are making a profit or loss. The business can also find out if they
are being paid money or do they need someone to get the money which is owed to the
business, on the other hand they can find out if they owe someone else money so that they are
aware that they are in debt. Furthermore, they can find out if they are spending too much
money, how much tax they need to pay HMRC and if they are able to invest in the business e.g.
stocks, update systems, new vehicles, new machines etc. In addition to this, accountants could
be used to manage accounts, this means they would be responsible for the planning, monitoring
and controlling of resources including staff, materials, stock and money. With the control of
money, they will also need to make sure that there are sufficient funds are available for staff
wages, paying bills, ordering stock etc.
Additionally, it is important to have historical data to be able to check on financial performance
because the business can reflect their results from now to the same date last year to see
whether they are doing better or worse. Also, historical data can guide a business so that they
can spend the right amount of money, on the right amount of stocks, at the right time so that
they can make more money than the last year and prevent any losses from occurring.
Furthermore, it can be used to forecast the future so that they are prepared to make sure that
they overcome any mistakes that they have done the previous year.
Explain in your own words any technical language/terms and apply to a selected business. (P1)
Income- Income is money that a business receives in exchange for providing a good or service
or through investing capital. Income is consumed to fuel day-to-day expenditures.In businesses,
income can refer to a company's remaining revenues after all expenses and taxes have been
paid. In this case, it is also known as "earnings". Most forms of income are subject to taxation.
Tesco receive their income from sales and the services they provide to the public.
Expenditure- is an amount of money which is spent outside the business for goods or services
that are needed, the reason why they might spend their money is because they are in need of
physical resources that will help the business to continue in its operation. For example, Tesco
might need to pay for initial stock, fuel, admin, wages, insurance, advertising, equipment
and drawing. These could all be either cash purchases or credit purchases. Tesco might also
need to repay a loan that they might have borrowed earlier from a bank.
Capital- is the money invested by the owners or other investors that is used to set up a business
or buy additional equipment. It tends to be used to buy things that will stay in the business for a
medium-to long period of time – for example, premises, vehicles or equipment. These are called
The main purpose of accounting for an organisation is to keep records of the financial
transactions of business. Financial transactions relates to money being received by the
business e.g. sales and loans, and money spent by the company e.g. purchase of equipment,
staff wages etc. From this, accountants can help a businesses find out how healthy they are by
showing them whether they are making a profit or loss. The business can also find out if they
are being paid money or do they need someone to get the money which is owed to the
business, on the other hand they can find out if they owe someone else money so that they are
aware that they are in debt. Furthermore, they can find out if they are spending too much
money, how much tax they need to pay HMRC and if they are able to invest in the business e.g.
stocks, update systems, new vehicles, new machines etc. In addition to this, accountants could
be used to manage accounts, this means they would be responsible for the planning, monitoring
and controlling of resources including staff, materials, stock and money. With the control of
money, they will also need to make sure that there are sufficient funds are available for staff
wages, paying bills, ordering stock etc.
Additionally, it is important to have historical data to be able to check on financial performance
because the business can reflect their results from now to the same date last year to see
whether they are doing better or worse. Also, historical data can guide a business so that they
can spend the right amount of money, on the right amount of stocks, at the right time so that
they can make more money than the last year and prevent any losses from occurring.
Furthermore, it can be used to forecast the future so that they are prepared to make sure that
they overcome any mistakes that they have done the previous year.
Explain in your own words any technical language/terms and apply to a selected business. (P1)
Income- Income is money that a business receives in exchange for providing a good or service
or through investing capital. Income is consumed to fuel day-to-day expenditures.In businesses,
income can refer to a company's remaining revenues after all expenses and taxes have been
paid. In this case, it is also known as "earnings". Most forms of income are subject to taxation.
Tesco receive their income from sales and the services they provide to the public.
Expenditure- is an amount of money which is spent outside the business for goods or services
that are needed, the reason why they might spend their money is because they are in need of
physical resources that will help the business to continue in its operation. For example, Tesco
might need to pay for initial stock, fuel, admin, wages, insurance, advertising, equipment
and drawing. These could all be either cash purchases or credit purchases. Tesco might also
need to repay a loan that they might have borrowed earlier from a bank.
Capital- is the money invested by the owners or other investors that is used to set up a business
or buy additional equipment. It tends to be used to buy things that will stay in the business for a
medium-to long period of time – for example, premises, vehicles or equipment. These are called
