GLOSSARY OF TERMS

Assets -

Items of value owned by the business, e.g. cash, buildings, vehicles, debtors, stock.

Associateship (associated companies) -

Companies with similar interests which usually belong to the same trade association or have directors who are common to such associated companies.

Balance Sheet -

Shows the financial position of a business. It is a statement of Assets, Liabilities and Proprietorship.

Business Plan -

A document outlining the goals, objectives and strategies which detail the future direction of a business.

Budget

Is a spending plan which enables an individual to satisfy his/her needs and wants according to the individual's income.

Company -

A limited liability business owned by a number of shareholders.

Private Company - a type of limited liability company which is prohibited from

offering shares to the public and which has no more than 50 shareholders.

Public Company - a type of limited liability company which has more than 50

shareholders and is financed by selling shares to the public.

Cooperative -

A type of business organisation which is owned by its customers who also participate in its management and share in its profits.

Creditors -

Businesses or individuals to whom you owe money (liabilities).

Credit Collection -

A system of collecting debts from debtors on time.

Credit Purchases Journal -

A daily record of all purchases of stock made on credit. It is prepared from invoices received from creditors.

Credit Transaction -

When goods are purchased and payment is deferred to a later date (usually 30 days). Credit transactions must be carefully controlled and accurate records of them kept.

Cash Flow -

The supply of cash necessary to meet financial obligations.

Debtors -

Businesses or individuals who owe the business money (assets).

Employment - Use of labour as a means of providing services and goods.

 Expenses - Costs incurred in running a business, e.g. rent, wages, electricity, interest.

Financial Management -

Planning the finances of a business, e.g. there must be enough cash available to pay for debts when they fall due.

Franchise -

A business such as McDonald's which has an established name and reputation and whose methods and marketing procedures are provided to independent operators to use in return for a fee.

Guarantee/Warranty

A document which accompanies goods specifying the quality and includes an undertaking to make good any defects under certain conditions.

Hire Purchase

The consumer pays a deposit and makes regular payments to the finance company. The consumer does not own the goods until all the payments have been made. If the payments are not fulfilled, the finance company may repossess the item.

Income

The payment of money which we receive in return for work which has been done.

Interest

A charge made by lending institutions for money borrowed by consumers.

Invoice -

The document used to record details of goods sold on credit. The original goes to the customer and a copy is kept by the business for record-keeping purposes.

Ledger Account -

Transactions of a similar nature are grouped together under an appropriate account heading as part of a book or card system. A separate ledger account is kept for each person or item.

Liabilities -

Debts owed by a business, e.g. creditors, bank overdraft, mortgage.

Loss -

A loss is when the costs of running the business are greater than the revenue earned.

Mortgage

An agreement between the bank and the consumer whereby the consumer's house/property is used as a security for the loan.

Overdrafts

A secured loan whereby the consumer borrows from the bank by arranging to overdraw on his/her cheque account.

Partnership -

A business run by two or more people (up to 20) who share all profits and losses.

Profit -

A profit is when the amount of revenue earned is greater than the expenses of running the business.

Proprietorship -

The amount invested in a business by its owner/s, i.e.

ASSETS - LIABILITIES = PROPRIETORSHIP.

Record-Keeping -

 A systematic approach of recording business transactions.

Remittance Advice - A document enclosed with a cheque detailing the payment of an account.

Revenue -

Money earned by a business from the sale of goods or the tendering of services.

Salary

A fixed payment made by an employer at regular intervals to a person, usually calculated on an annual basis.

Sales Journal -

A daily record of all credit sales of trading stock. It is prepared from copies of invoices. No cash sales are recorded in this journal.

Self-Employment -

Working for oneself, i.e. operating a business.

Small Business -

A business which is small in size and usually managed by the owner/s.

Small Claims Tribunal

Provides the consumer with an efficient and cheap means of resolving disputes /complaints.

Sole Trader - A business with unlimited liability owned and operated by an individual.

Source Documents - Business documents which contain the initial record of a transaction.

Sources of Finance - Lending institutions such as trading banks, merchant banks, credit unions, stock exchange, short-term money market, trade creditors, finance companies.

Statement of Account - A document which is a copy of a customer's account detailing the transactions for the month and the amount owing at the end of the month.

Wage

Regular payment to an employee in return for work or services