IB Business Management FINANCE AND ACCOUNTS 3.4 Final Accounts
Final Accounts - The two main business 1. Profit and Loss Account (income statement)
accounts: 2. Balance sheet
The legal act of creative accounting by manipulating financial data to make the
Window dressing
results look more flattering
Profit and Loss Account A financial statement showing a company's net profit or loss in a given period.
1. Trading account - Difference between sales revenue and direct costs of tradi
Three sections of an income statement: 2. Profit and loss account - Record of past 12 months trading.
3. Appropriation account - Shows allocation of profit after interest and tax
Gross profit Gross profit = sales revenue less cost of sales
The total value of sales made during the trading period = selling price x quanti
Sales revenue / turnover
sold (sales turnover)
This is the direct cost of purchasing the goods that were sold during the financ
Cost of goods sold / Cost of sales
year (cost of goods sold)
Operating profit Operating profit = gross profit - overhead expenses (net profit)
Net profit Net profit = gross profit - overhead expenses (net profit)
Dividends The share of profits paid to shareholders as a return for investing in a company
The profit left after all deductions, including dividends, have been made. This is
Retained profit
'ploughed back' into the company as a source of finance
, IB Business Management FINANCE AND ACCOUNTS 3.4 Final Accounts
Low-quality profit One-off profit that cannot easily be repeated or sustained
High-quality profit Profit that can be repeated and sustained
1. Measure the performance of a business against targets, previous time period
competitors
How stakeholders use business accounts: 2. Help them with decisions; e.g., new investments, branch closures, launching n
Business managers products
3. Control and monitor the operation of each department, branch and division
4. Set targets for the future and review against actual performance
1. Decide whether to lend money to a business
How stakeholders use business accounts:
2. Assess whether to allow for an increased overdraft facility
Banks
3. Decide whether to renew sources of finance; e.g., overdraft, loans, etc
1. Assess whether the business is secure and liquid enough to pay off its debts
How stakeholders use business accounts:
2. Assess whether the business is a good credit risk
Creditors, such as suppliers
3. Decide whether to press for early repayment of outstanding debts
1. Assess whether a business is secure
How stakeholders use business accounts: 2. Determine whether they will be assured of future supplies of the good they a
Customers purchasing
3. Establish whether there will be security of spare parts and service facilities
Final Accounts - The two main business 1. Profit and Loss Account (income statement)
accounts: 2. Balance sheet
The legal act of creative accounting by manipulating financial data to make the
Window dressing
results look more flattering
Profit and Loss Account A financial statement showing a company's net profit or loss in a given period.
1. Trading account - Difference between sales revenue and direct costs of tradi
Three sections of an income statement: 2. Profit and loss account - Record of past 12 months trading.
3. Appropriation account - Shows allocation of profit after interest and tax
Gross profit Gross profit = sales revenue less cost of sales
The total value of sales made during the trading period = selling price x quanti
Sales revenue / turnover
sold (sales turnover)
This is the direct cost of purchasing the goods that were sold during the financ
Cost of goods sold / Cost of sales
year (cost of goods sold)
Operating profit Operating profit = gross profit - overhead expenses (net profit)
Net profit Net profit = gross profit - overhead expenses (net profit)
Dividends The share of profits paid to shareholders as a return for investing in a company
The profit left after all deductions, including dividends, have been made. This is
Retained profit
'ploughed back' into the company as a source of finance
, IB Business Management FINANCE AND ACCOUNTS 3.4 Final Accounts
Low-quality profit One-off profit that cannot easily be repeated or sustained
High-quality profit Profit that can be repeated and sustained
1. Measure the performance of a business against targets, previous time period
competitors
How stakeholders use business accounts: 2. Help them with decisions; e.g., new investments, branch closures, launching n
Business managers products
3. Control and monitor the operation of each department, branch and division
4. Set targets for the future and review against actual performance
1. Decide whether to lend money to a business
How stakeholders use business accounts:
2. Assess whether to allow for an increased overdraft facility
Banks
3. Decide whether to renew sources of finance; e.g., overdraft, loans, etc
1. Assess whether the business is secure and liquid enough to pay off its debts
How stakeholders use business accounts:
2. Assess whether the business is a good credit risk
Creditors, such as suppliers
3. Decide whether to press for early repayment of outstanding debts
1. Assess whether a business is secure
How stakeholders use business accounts: 2. Determine whether they will be assured of future supplies of the good they a
Customers purchasing
3. Establish whether there will be security of spare parts and service facilities
