BTEC Business - C1

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  • Created by: Kaicee05
  • Created on: 14-05-23 14:49

What is accounting?

Accounting involves making a record of the businesses financial transactions and preparing information  which can be used to assess the businesses performance. 

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Record Transactions

Keeping business records accurate and up to date is important for smooth running. Must keep record of money coming in (sales) and money going out (expenses). If they forget they'll be in trouble with the HMRC and it can lead to tax playments being wrong. 

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Compliance

Goverened by laws and regulations. It's to ensure financial records are fair and represent an accurate picture of the business. It means investors and stakeholders are not misinformed and also helps protect against fraud (company monies used inappropriately or for personal gain). 

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Management of the Business

A manager is respnsible for planning, monitoring and controlling the business and resources. They have to make informed decisions and plan for the future. They must carefully coordinate staff, materials, stock and money. Also, need to balance money coming in with money going out. 

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Control

Accounting controls flow of money in/ out the business by keeping record and measuring performance. Unusual activity is spotted and protected against fraud. Will have to control trade recievables (money owed) and trade payables (money they owe). Ensures they can meet day to day expenses. A chance the business may not survive if they're not controlled properly. 

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Measuring Performance

You need financial records to see if the business is making a profit or a loss.

Gross Profit - Amount of profit left after the cost of producing the good is deducted from sales revenue.

Net Profit - Smaller amount of profit made after all expenses are deducted from gross profit. 

Value owed to business - Money owed to the business which hasn't been paid yet. 

Valued owed by the business - Money the business owes to others for goods. 

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