Accounting Key Terms

Accounts
• Accounts: The financial records of a firm’s transactions.
• Balance Sheet: An account that gives a statement of a firm’s wealth on a particular date and shows its assets, liabili-
ties and capital.
• Profit and Loss Account: A financial account showing the revenue, costs and profit of a business over a period of
time.
• Cash Flow Forecast: A prediction of future flows of cash into and out of a business set out in a graph.
• Break Even Point: The level of sales at which total costs equal total revenue.
• Cash Inflow: A flow of cash into the business.
• Cash Outflow: A flow of cash out of the business.
• Cash Deficit: Where a firm finds itself short of cash because the outflow is greater than the inflow
• Capital Employed: This is the total amount of capital or money put into the business.
• Creditors: These are people or organisations who have supplied goods or services to a firm but have not yet been paid
for them.
• Debtors: These are people or organisations who have bought goods or services from a firm but have not yet paid for
them.
• Depreciation: The method of lowering the value of fixed assets for ‘wear and tear’.

Sources of Finance
• Grants: Money given to a firm to help it to operate and expand. This does not have to be paid back.
• Loans: A specific sum of money borrowed for a fixed period of time with interest charged by the lender.
• Overdraft: A means of taking more money from a bank account than is in the account, interest charged.
• Owners’ Funds: Money put into the business by the owner. The money will stay in the business as long as it continues
to operate.
• Retained Profit: Profits kept back in the company as a reserve or for re-investment.
• Hire Purchase: The buying of equipment by paying in instalments, usually including interest.
• Trade Credit: Arranged with a supplier to delay payments for goods and services received until a due date.

Accounting Key Terms

Accounts
• Accounts: The financial records of a firm’s transactions.
• Balance Sheet: An account that gives a statement of a firm’s wealth on a particular date and shows its assets, liabili-
ties and capital.
• Profit and Loss Account: A financial account showing the revenue, costs and profit of a business over a period of
time.
• Cash Flow Forecast: A prediction of future flows of cash into and out of a business set out in a graph.
• Break Even Point: The level of sales at which total costs equal total revenue.
• Cash Inflow: A flow of cash into the business.
• Cash Outflow: A flow of cash out of the business.
• Cash Deficit: Where a firm finds itself short of cash because the outflow is greater than the inflow
• Capital Employed: This is the total amount of capital or money put into the business.
• Creditors: These are people or organisations who have supplied goods or services to a firm but have not yet been paid
for them.
• Debtors: These are people or organisations who have bought goods or services from a firm but have not yet paid for
them.
• Depreciation: The method of lowering the value of fixed assets for ‘wear and tear’.

Sources of Finance
• Grants: Money given to a firm to help it to operate and expand. This does not have to be paid back.
• Loans: A specific sum of money borrowed for a fixed period of time with interest charged by the lender.
• Overdraft: A means of taking more money from a bank account than is in the account, interest charged.
• Owners’ Funds: Money put into the business by the owner. The money will stay in the business as long as it continues
to operate.
• Retained Profit: Profits kept back in the company as a reserve or for re-investment.
• Hire Purchase: The buying of equipment by paying in instalments, usually including interest.
• Trade Credit: Arranged with a supplier to delay payments for goods and services received until a due date.
 Accounting Key Terms
Costs & Revenues
• Costs of Production: Payments for buying or hiring the resources needed to make a product, sell goods or
provide a service.
• Fixed Costs: Costs which do not change as output changes.
• Indirect Costs: Costs which cannot be related to a particular product, often called overheads.
• Running Costs: Costs paid out at regular intervals to keep the business running.
• Total Costs: The combined total of fixed costs and variable costs for any level of output.
• Unit Costs: The average cost of making a single item.
• Variable Costs: Costs which vary with the number of items sold or produced.
• Expenses: All the operating costs of a firm, sometimes called overheads.
• Inflation: A rise in average price levels of goods and services measured by the retail price index.
• Liabilities: The debts of a business both long and short term.
• Liquidity: The ability of a business to obtain cash to pay back its
short term debts.
• Long Term Liabilities: Capital borrowed for use in a business to
be repaid in a time period of longer than one year.
• Contribution: The sales revenue of an item (its price) minus the
variable cost of making and selling that item.
• Revenue: Income from the sale of goods and services over a pe-
riod of time.

Accounting Key Terms

Costs & Revenues
• Costs of Production: Payments for buying or hiring the resources needed to make a product, sell goods or
provide a service.
• Fixed Costs: Costs which do not change as output changes.
• Indirect Costs: Costs which cannot be related to a particular product, often called overheads.
• Running Costs: Costs paid out at regular intervals to keep the business running.
• Total Costs: The combined total of fixed costs and variable costs for any level of output.
• Unit Costs: The average cost of making a single item.
• Variable Costs: Costs which vary with the number of items sold or produced.
• Expenses: All the operating costs of a firm, sometimes called overheads.
• Inflation: A rise in average price levels of goods and services measured by the retail price index.
• Liabilities: The debts of a business both long and short term.
• Liquidity: The ability of a business to obtain cash to pay back its
short term debts.
• Long Term Liabilities: Capital borrowed for use in a business to
be repaid in a time period of longer than one year.
• Contribution: The sales revenue of an item (its price) minus the
variable cost of making and selling that item.
• Revenue: Income from the sale of goods and services over a pe-
riod of time.