Non-Current or Current, Assets or Liabilities
Cash in the bank
Current Asset
What's the formula for Gross Profit Margin?
(Gross Profit/Revenue) x 100
This short-term safety net allows a business to withdraw more money than is in its account, though it usually comes with high daily interest rates.
Overdraft
This expenditure covers essential services like electricity, gas, and water required to keep a business premises running.
Rates/Utilities
An accounting method spreading the cost of a non-current asset over its useful life, reflecting its gradual loss of value due to wear, tear or obsolescence.
Depreciation
Overdraft
Current Liability
Revenue = £1,000
Gross Profit = £200
What is the Gross Profit Margin?
(£200/£1,000) x 100 = 20%
A formal, long-term agreement where a lender provides a lump sum that must be repaid with interest over a fixed period, often requiring security or collateral.
Bank Loan
These are the direct costs spent on the physical items needed to make a product, such as wood for a table or flour for a bakery.
Materials
The time period (annual, quarterly, monthly) covered by a report or set of accounts produced by a business
Accounting period
A tractor on a farm
Non-Current Asset
What's the formula for breakeven point?
Fixed Assets/Contribution per unit
Contribution per unit = Sales Price - Variable Cost
A popular choice for Social Enterprises, this involves raising small amounts of money from a large number of people, usually via an online platform.
Crowdfunding
This cost is the price of borrowing paid to a lender in exchange for using a bank loan or an overdraft.
Interest Fees
Tax set by government on the net profit of a limited company. This means a tax on the profit that remains once all of the liabilities (debts) have been paid off
Corporation tax
Trade Payable/Trade Creditor
Current Liability
Fixed Costs = £10,000
Sales Price = £75
Variable Cost per unit = £25
What's the breakeven point?
£10,000/£50 = 200 units
This involves the founder putting their own personal savings into the business to get it started, showing they are fully committed to the venture.
Owner's Capital
A fixed monthly or annual payment made to a provider to protect the business against risks like fire, theft, or public liability.
Insurance
Individuals, groups or entities that have an interest in the activities of an organisation and who are affected by the actions or performance of the organisation.
Stakeholders
Mortgage
Non-Current Liability
Fixed Costs = £10,000
Contribution per unit = £50
The owner wants a target profit of £5,000
How many units must they sell?
(£10,000+£5,000) / 50 = 300 units
This external source involves renting an asset, like a delivery van or a photocopier, for a monthly fee instead of buying it outright.
Leasing
These small, recurring costs are charged by financial institutions for services like processing credit card payments or maintaining a business account.
Bank Fees
Funds used by a company to acquire/upgrade/maintain physical assets such as: land, buildings, plant, technology, equipment.
Capital expenditure