TERM CALCULATION EXPLANATION EXAMPLES
INCOME Result of labour or investments of capital Prices Charged for Services
Profit Costs
Closing Work in Progress
Prices Charged for Stock Sold
Interest Received
Insurance Commission Received
EXPENSES Benefit of which is obtained and exhausted in a Price Paid for Stock bought for Resale
relatively short time General expenses
E Wages
Interest Paid
Hire Charges
Petrol
Repairs
ASSETS Result of expenditure Premises
Gives rise to a benefit which can be spread over Machinery
a longer period and will increase the earning Fixtures and Fittings
capacity of the business Vehicles
Listed in decreasing order in performance Cars
Client Bank Account
Office Equipment
Cash
Debtors
FIXED ASSETS Bought not for resale but to improve efficiency Cars
of the business Office equipment
Cannot be sold without damaging the business’
ability to trade
CURRENT Short-term assets Cash
ASSETS For example, cash and debtors Debtors
‘circulating assets’ Client Bank Account
Debtors always shown above cash because cash
is more liquid
LIABILITIES Amounts owing from the business Capital
Loan interest
, Profit costs
Amount due to clients
Bank loans
Creditors
CURRENT Those repaying in 12 months or less from the
LIABILITIES date of the Balance Sheet
Overvalued? Depreciation, debtors
LONG-TERM Repayable more than 12 months from the date Bank Loan (Exceeding 12 months)
LIABILITIES of the Balance Sheet
DOUBLE ENTRY System of recording financial dealings built upon
BOOKKEEPING a series of rules
For every transaction two aspects occur
DEBIT Appears as ‘DR’
Decreases liability, revenue or equity
Increases assets or expenses
CREDIT Appears as ‘CR’
Increases liability, revenue or equity
Decreases assets or expenses
FINAL Enable proprietor to assess the past
ACCOUNTS performance of the business and make informed
decisions about the future
Comprise a Profit and Loss account and a
Balance Sheet
PROFIT AND Income - Expenses Shows Net Profit
LOSS ACCOUNT This shows the amount of money the business is
making
Either: goods (Stock) or services (Work in
Progress)
TRADING Shows Gross Profit
ACCOUNT For businesses which trade with goods rather
than services
GROSS PROFIT Sales Revenue – Improving profit: reduce expenses; charge more;
Purchase Costs do more work for same price/lower price
NET PROFIT Gross Profit -
INCOME Result of labour or investments of capital Prices Charged for Services
Profit Costs
Closing Work in Progress
Prices Charged for Stock Sold
Interest Received
Insurance Commission Received
EXPENSES Benefit of which is obtained and exhausted in a Price Paid for Stock bought for Resale
relatively short time General expenses
E Wages
Interest Paid
Hire Charges
Petrol
Repairs
ASSETS Result of expenditure Premises
Gives rise to a benefit which can be spread over Machinery
a longer period and will increase the earning Fixtures and Fittings
capacity of the business Vehicles
Listed in decreasing order in performance Cars
Client Bank Account
Office Equipment
Cash
Debtors
FIXED ASSETS Bought not for resale but to improve efficiency Cars
of the business Office equipment
Cannot be sold without damaging the business’
ability to trade
CURRENT Short-term assets Cash
ASSETS For example, cash and debtors Debtors
‘circulating assets’ Client Bank Account
Debtors always shown above cash because cash
is more liquid
LIABILITIES Amounts owing from the business Capital
Loan interest
, Profit costs
Amount due to clients
Bank loans
Creditors
CURRENT Those repaying in 12 months or less from the
LIABILITIES date of the Balance Sheet
Overvalued? Depreciation, debtors
LONG-TERM Repayable more than 12 months from the date Bank Loan (Exceeding 12 months)
LIABILITIES of the Balance Sheet
DOUBLE ENTRY System of recording financial dealings built upon
BOOKKEEPING a series of rules
For every transaction two aspects occur
DEBIT Appears as ‘DR’
Decreases liability, revenue or equity
Increases assets or expenses
CREDIT Appears as ‘CR’
Increases liability, revenue or equity
Decreases assets or expenses
FINAL Enable proprietor to assess the past
ACCOUNTS performance of the business and make informed
decisions about the future
Comprise a Profit and Loss account and a
Balance Sheet
PROFIT AND Income - Expenses Shows Net Profit
LOSS ACCOUNT This shows the amount of money the business is
making
Either: goods (Stock) or services (Work in
Progress)
TRADING Shows Gross Profit
ACCOUNT For businesses which trade with goods rather
than services
GROSS PROFIT Sales Revenue – Improving profit: reduce expenses; charge more;
Purchase Costs do more work for same price/lower price
NET PROFIT Gross Profit -
