AAT Level 2 Business Environment key terms

The combination of internal and external conditions, including competitors, customers, suppliers, laws and the economy, that influence how an organisation operates and the decisions its managers make.

A technique for scanning the external environment by grouping influences into political, economic, social, technological, legal and environmental factors so that threats and opportunities can be identified.

A structured review of an organisation's internal strengths and weaknesses alongside external opportunities and threats, used to inform strategy and planning.

Any individual or group with an interest in what an organisation does, such as owners, employees, customers, suppliers, lenders, regulators or the local community.

A person or institution that owns shares in a company, giving them a claim on profits through dividends and usually voting rights at general meetings.

An individual who runs a business in their own name with no separate legal identity, so they keep all profits but are personally liable for all business debts.

A business owned by two or more people who share profits and decision-making under an agreement, with liability normally unlimited unless a limited liability partnership is formed.

A business registered as a separate legal entity from its owners, meaning shareholder liability is normally capped at the amount unpaid on their shares.

A legal protection meaning owners of a company can lose only the capital they invested, not their personal assets, if the business cannot pay its debts.

A position where an owner is personally responsible for all business debts, so personal assets may be used to settle amounts the business cannot pay.

A company whose shares are not traded on a public stock market and whose ownership is restricted, often used by smaller or family-controlled businesses.

A company whose shares may be offered to the general public and traded on a recognised stock exchange, subject to stricter capital and disclosure requirements.

An entity set up to pursue a social, charitable or member-serving purpose rather than to distribute profit, with any surplus retained for its objectives.

A formal document filed when a company is incorporated which states that the subscribers wish to form a company and agree to take at least one share each.

The internal rulebook of a company covering matters such as share transfers, directors' powers and decision-making procedures at meetings.

The way responsibilities, authority and reporting relationships are arranged within an organisation, often shown as a chart of departments and levels.

The number of subordinates who report directly to a single manager, which affects how closely work can be supervised and how many management layers are needed.

The line of authority running from senior levels down to operational staff, showing who reports to whom and through which route instructions pass.

Passing authority to carry out a task to a more junior person while the manager who delegates usually remains accountable for the outcome.

The part of an organisation responsible for recording transactions, managing cash and credit, preparing reports and supporting planning and control decisions.

The routine recording of financial transactions in accounting records, such as day books and ledgers, so that accurate information is available for later reporting.

A system in which every transaction is recorded with equal debit and credit entries, so total debits always equal total credits in the ledger accounts.

A list of ledger account balances at a given date, used to check arithmetically that total debit balances equal total credit balances.

A temporary ledger account used to hold the difference when a trial balance does not agree, pending investigation and correction of the underlying error.

The preparation of periodic statements, such as a statement of profit or loss and statement of financial position, mainly for owners, lenders and other external users.

The production of budgets, cost information and performance reports for managers inside an organisation to support planning, decision-making and control.

A report at a point in time showing an entity's assets, liabilities and equity, sometimes still called a balance sheet.

A resource controlled by an entity as a result of past events from which future economic benefits are expected, such as cash, inventory, equipment or amounts owed by customers.

A present obligation arising from past events that is expected to result in an outflow of resources, such as a bank loan, trade payable or unpaid tax.

A financial plan expressed in money terms for a future period, setting out expected income and expenditure against which actual results can be monitored.

The difference between a planned or budgeted figure and the actual figure achieved, often analysed to explain why performance differed from plan.

The policies and procedures, such as authorisation limits and segregation of duties, designed to safeguard assets and keep accounting records reliable.

An internal control that prevents one person from handling all stages of a transaction, reducing the risk that errors or fraud go undetected.

An independent examination of financial statements or records, carried out to give an opinion on whether they are fairly presented or to check compliance.

The principles and standards of conduct expected of accounting professionals, including integrity, objectivity, competence, confidentiality and professional behaviour.

The ethical principle requiring an accountant to be straightforward and honest in all professional and business relationships, including not signing misleading records.

The ethical principle that an accountant should not allow bias, conflict of interest or undue influence of others to override professional judgements.

The ethical duty to keep information learned through professional work private and not disclose or use it without proper authority, except where there is a legal or professional right to do so.

A situation where personal interests, or duties owed to another party, could improperly influence professional judgement and so threaten objectivity.

Rules, laws and oversight imposed on businesses and accountants from outside the organisation, such as company law, tax rules and the requirements of professional bodies.

Legal rules governing how personal information about living individuals may be collected, stored, used and shared, giving those individuals rights over their data.

The process of disguising the origin of money obtained from crime so it appears legitimate; businesses in regulated sectors must report suspicious activity.