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FINANCE AND ACCOUNTS (PURPOSE OF ACCOUNTS (CUSTOMERS
• Interested in…
FINANCE AND ACCOUNTS
PURPOSE OF ACCOUNTS
CUSTOMERS
• Interested in knowing whether there will be a constant supply of a firm’s products in the future.
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EMPLOYEES
• Signal the employees that their jobs will be secure.
• Indicate they could get a pay raise.
THE GOVERNMENT
• Check on whether the business is abiding by the law regarding accounting regulations.
MANAGERS
• To set targets, judge and compare their performance within a particular financial year or number of years.
COMPETITORS
• Compare their financial statements with those of other firms to see how well they are performing financially.
SHAREHOLDER
• Interested in knowing how valuable the business is becoming throughout its financial year.
FINANCIERS
• Check on the creditworthiness of the business to establish how much money they can lend.
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INTANGIBLE ASSETS
COPYRIGHT LAWS
• Laws that provide a creator with the exclusive right to protect the production and sale of their artistic or literary work.
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PATENTS
• Provide exclusive rights to manufacture, use, sell, or control their invention of a product.
• Provided with legal protection.
TRADEMARKS
• Recognizable symbol, word, phrase or design that is officially registered and that identifies a product or business.
• Distinguish a firm.
MAIN FINAL ACCOUNTS
THE BALANCE SHEET
• Statement of financial position.
• Assets, liabilities and equity.
PROFIT AND LOSS ACCOUNT
THE PROFIT AND LOSS ACCOUNT
• Net profit before interest and tax = gross profit – expenses
• Net profit before tax = net profit interest and tax – interest
• Net profit after interest and tax = net profit before tax – corporation tax
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THE TRADING ACCOUNT
• Gross profit = sales revenue – cost of sales
• Cost of sales = opening stock + purchases – closing stock
EQUITY
SHARE CAPITAL
• Original capital invested into the business through shares bought by shareholders.
• Permanent source of capital.
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LIABILITIES
• Working capital = total current assets – total current liabilities
• Total assets less current liabilities = (fixed assets + current assets) – current liabilities
• Total assets less current liabilities = fixed assets + working capital
• Net assets = (total assets less current liabilities) – long-term liabilities