BUSINESS ACCOUNTING

1.      Profit and loss account: An account that records business sales revenue, all costs and expenses, and any loss/profit made during the year.

2.      Trading account: The part of the profit and loss account that records revenue, cost of sales and gross profit.

3.      Sales turnover: The value of sales in a certain time period.

4.      Net profit: Profit after subtracting all expenses/ overheads from gross profit.

5.      Gross profit: profit after subtracting the cost of sales from sales turnover.

6.      Corporation tax: Tax on company net profits.

7.      Dividends: Annual payments from company profits to shareholders.

8.      Depreciation: The fall in the value of fixed assets over time.

9.      Liquidity: The ability of the business to convert its assets in to cash and pay off short term debts.

10.  Current ratio: Current asset / current liabilities

11.  Acid test ratio: current asset-stock / current liabilities

12.  Return on capital employed (%): Net profit / Capital employed X 100

13.  Retained profit: Profit made after payment of tax and dividends. It is reinvested back into the business.

14.  Gross profit margin(%): Gross profit / Sales turn over X 100

15.  Net profit margin (%): Net profit / Sales turnover X 100

16.  Balance sheet: The account records all business assets and liabilities and the value of shareholders funds.

17.  Working capital: The capital needed by a business to finance its day to day needs.

18.  Fixed assets: Assets owned by a business that it expects to keep and use for more than one year.

19.  Current assets: Assets that the business will use up or turn into cash within one year.

20.  Current liabilities: Loans and debts of the business that will be repaid within one year.

21.  Long term liabilities: The money value of the debts that do not have to be repaid in one year.

22.  Shareholders fund: Finance provided by shareholders –share capital or retained profits.

23.  Capital employed: Total value of business’s long term finance.