AAT Level 2 Business Environment flashcards
AAT Level 2 Business Environment · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- PESTLE analysis
- A framework that scans Political, Economic, Social, Technological, Legal and Environmental forces in the macro-environment to identify external influences on a business.
- SWOT analysis
- A tool listing internal Strengths and Weaknesses alongside external Opportunities and Threats, used to assess a business's strategic position.
- Micro-environment
- The immediate operating setting of a business, comprising customers, suppliers, competitors and intermediaries, which the business can directly influence.
- Macro-environment
- Economy-wide and society-wide forces outside the business's control, such as government policy, inflation, technology and social trends.
- Stakeholders
- Individuals or groups with an interest in the business, including owners, employees, customers, suppliers, lenders, government and the local community.
- Economic cycle
- The recurring pattern of boom, recession and recovery in an economy, affecting demand, employment levels and interest rates.
- Inflation
- A sustained rise in the general price level, which reduces the purchasing power of money and raises business costs.
- Opportunity cost
- The value of the next best alternative given up when a business chooses one course of action over another.
- Sole trader
- A business owned and controlled by one person, with no separate legal identity and unlimited personal liability for business debts.
- Partnership
- A business owned by two or more partners who share profits and usually carry unlimited liability unless formed as a limited liability partnership.
- Limited liability
- A principle where owners of a company lose only the capital they invested, because the company is a separate legal entity.
- Public limited company
- A company whose shares may be offered to the public, subject to minimum share capital and disclosure requirements.
- Span of control
- The number of subordinates who report directly to one manager; a wide span creates a flat structure, a narrow span a tall one.
- Chain of command
- The unbroken line of authority running from the most senior level to the most junior, showing who reports to whom.
- Delegation
- The passing of authority to carry out a task to a subordinate, while ultimate accountability remains with the person who delegated.
- Centralisation
- An organisational approach in which decision-making authority is concentrated at senior or head-office level rather than devolved locally.
- Not-for-profit organisation
- An entity such as a charity, mutual or public body whose objective is a service or social purpose rather than distributing profit to owners.
- Accounting equation
- Assets equal Capital plus Liabilities; the statement must remain in balance after every transaction is recorded.
- Double-entry bookkeeping
- A system in which every transaction is recorded with equal debit and credit entries, keeping the accounting equation in balance.
- Books of prime entry
- The first records of transactions: sales and purchases day books, returns day books, cash book, petty cash book and general journal.
- Trial balance
- A list of debit and credit balances used to check arithmetic equality; it does not detect errors of principle, omission or commission.
- Gross profit
- Revenue minus cost of sales, measuring the profit earned from trading before operating expenses are deducted.
- Net profit
- Gross profit minus all operating expenses, showing the overall profit earned in the period.
- Working capital
- Current assets minus current liabilities, indicating whether a business can meet its short-term obligations as they fall due.
- Management accounting
- Internal reporting for planning, control and decision-making, with no prescribed legal format and produced as often as managers need.
- Segregation of duties
- An internal control splitting tasks such as authorising, recording and holding assets between different people to reduce fraud risk.
- Integrity
- The ethical principle requiring accountants to be straightforward, honest and truthful in all professional and business relationships.
- Objectivity
- The principle that accountants must not let bias, conflict of interest or undue influence of others override professional judgement.
- Confidentiality
- The principle that information obtained through work must not be disclosed without authority, unless there is a legal or professional duty to do so.
- Professional competence and due care
- The principle requiring accountants to maintain the knowledge and skill needed and to act diligently in line with current standards.
- Money laundering
- The process of concealing the criminal origin of money; accountants must report suspicious activity to their nominated officer.
- Companies Act 2006
- UK legislation governing company formation, directors' duties, financial reporting, filing at Companies House and audit requirements.